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Saudi Arabia’s PMI shows downturn in March

Saudi Arabia’s PMI

Saudi Arabia’s PMI has showed a decline during March, after falling to 53.3 points, compared to 53.9 points in February, said IHS Markit.

The group said business output expectations weakened in March and were the least optimistic in the current nine-month sequence of positivity.

The PMI index provides an accurate overview of operating conditions and shows working and operating conditions in the non-oil private sector, which is very important to the country’s economy.

Saudi Arabia’s PMI decreased by about 3.8 points from its last peak in January, indicating that the recovery of the Saudi economy from the effects of the pandemic lost some momentum during the first quarter of this year.

Business conditions in the non-oil-producing private sector continued to improve in the Kingdom at the end of the first quarter of 2021. However, it lost more momentum from its last peak in January, coinciding with a decline of new orders for the third month in a row.

“March PMI data pointed to weaker growth in non-oil business conditions in Saudi Arabia, suggesting a cooling off in the economic recovery since the start of the year,” commenting on the latest survey results, David Owen, Economist at IHS Markit, said.

“With strong sales growth revealed in January data, though, we should still see an improvement in business activity reflected in official data for the first quarter of 2021. The quarterly PMI average of 54.8 was the highest since the end of 2019, but still weak compared to much of the series”.

The PMI is based on five major survey areas: new orders, inventory levels, production, supplier deliveries, and employment. The ISM weighs each of these survey areas equally. The surveys include questions about business conditions and any changes, whether it be improving, no changes, or deteriorating.

To calculate the index, a monthly survey is sent to purchasing managers in hundreds of companies within the country, and the index is prepared according to that data.

A comparison is made between the index reading for each month. A reading of the index at 50 points indicates that no change is taking place in the conditions of the non-oil production sector.

As above 50 points reading indicates growth in the non-oil private sector, and thus a reading below 50 points reflects a decline and contraction in that sector.

Saudi Arabia also suffered the double blow represented by the Coronavirus pandemic and the economic closure, as well as the significant decline in oil prices last year.

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