Saudi Non-Oil PMI Enters Contraction in March

Saudi Arabia's Non-Oil Sector Contracts for First Time Since 2020

Saudi Arabia’s non-oil private sector activity experienced a contraction in March, a first since the economic slowdown in August 2020. The Riyad Bank Saudi Arabia Purchasing Managers’ Index, or PMI, fell to 48.8 from 56.1 in February, dropping below the 50.0 mark that separates growth from contraction.

Situation Overview

The downturn is largely attributed to short-term uncertainty linked to geopolitical tensions in the Middle East, which have significantly disrupted supply chains. The survey, compiled by S&P Global, highlighted a sharp decline in business activity as clients adopted a more cautious stance, leading to a pause in new orders.

Economic and Market Impact

The primary impact was seen in a sharp fall in new business. The new orders sub-index plummeted to 45.2 in March from 61.8 in the previous month. New export orders recorded their steepest decline in nearly six years, with firms reporting logistical challenges and a temporary slowdown in cross-border activity. This led to a corresponding moderation in output.

Summary and Outlook

Despite the current contraction and intensified supply strains, business expectations for the next 12 months remain positive overall. Confidence is supported by anticipated government spending and infrastructure projects, although optimism has weakened to its lowest level since June 2020.

FAQ

Q: What does the March PMI figure of 48.8 indicate?
A: A PMI reading below 50.0 signifies a contraction in business activity. The March figure of 48.8 shows that Saudi Arabia's non-oil private sector shrank for the first time since August 2020.

Q: What was the main driver of this economic downturn?
A: The contraction was primarily driven by regional geopolitical tensions, which snarled supply chains, leading to a sharp decline in new orders and particularly in export demand.

Source: Investing.com