Saudi Arabia's non-oil private sector shrinks for third straight month

[DUBAI] Saudi Arabia's non-oil private sector contracted for the third straight month in May as measures to stem the spread of the coronavirus continued to hit demand, although it shrank at a slower pace than in the previous two months, a survey showed.

The seasonally adjusted IHS Markit Saudi Arabia Purchasing Managers' Index (PMI) rose to 48.1 in May from 44.4 in April, remaining under the 50.0 mark that separates growth from contraction.

May is only the third time in the survey's history that the headline figure was in contractionary territory. It hit a record low of 42.4 in March.

"Business conditions in Saudi Arabia deteriorated again during May, but the speed of the downturn moderated from April's survey-record pace," said Tim Moore, economics director at IHS Markit.

"New work continued to fall at a faster pace than at any time prior to the Covid-19 pandemic, with survey respondents commenting on rapid spending cutbacks among clients in response to concerns about the economic outlook."

The output sub-index shrank in May, though at a slower pace than April's survey record-low, rising to 47.5 from 37.5.

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As of June 1, Saudi Arabia had reported 87,142 cases of Covid-19, the disease caused by the new coronavirus, and 525 deaths - both the highest out of the six Gulf Cooperation Council countries.

The kingdom has eased strict lockdown measures imposed to stem the spread of the coronavirus, including opening mosques for the first time in more than two months.

The easing of lockdown measures helped mitigate the downturn in business activity, the PMI report said, though businesses continued to report a severe impact.

Employment levels also shrank in May but at a slower pace compared to April, while staff costs fell to a survey record-low due to wage cuts amid low demand.

REUTERS