The Purchasing Managers’ Index (PMI) sponsored by Emirates NBD and produced by IHS Markit fell from 57.3 in December to 53.0 in January. Although January’s reading was the lowest point since the survey began in August 2009, the index remains above the 50-threshold that indicates expansion in business activity in the non-oil producing private sector.
January’s figure reflects much softer growth in both output and new orders following the introduction of value-added tax (VAT) on 1 January. That said, the impact of VAT introduction will likely be temporary as firms continued to increase their staffing levels, while business sentiment climbed to an eight-month high. Although cost burdens increased across the non-oil economy due to fuel subsidy cuts and the implementation of VAT, selling prices only rose at a marginal pace due to strong competitive pressures. Khatija Haque, Head of MENA Research at Emirates NBD, adds that “The softness in the January PMI survey was fairly broad-based, with faster employment growth being the main highlight. Wage increases, fuel subsidy cuts and the introduction of the VAT is evident in the higher input costs and staff costs components of the survey in January. However, firms were the most optimistic about their prospects in the coming 12 months than they have been since May 2017.”
Saudi Arabia Fixed Investment Forecast
FocusEconomics Consensus Forecast panelists see fixed investment rising 2.9% in 2018, which is down 0.6 percentage points from last month’s estimate. For 2019, the panel expects fixed investment to increase 4.8%.
Note: Emirates NBD Purchasing Managers’ Index. Readings above 50 indicate an improvement in non-oil private sector conditions while readings below 50 point to a deterioration.
Source: Emirates NBD and IHS Markit.