Tourism, construction boost Saudi Arabia's non-oil sector in June: PMI
Business
Govt is pouring billions of dollars into developing non-oil sectors to diversify revenue sources
DUBAI (Reuters) – Non-oil business activity in Saudi Arabia surged in June, supported by strength in construction and tourism, a survey showed on Wednesday.
The seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers' Index (PMI) rose to 59.6 in June, from 58.5 in May, and was well above the 50 mark that signals growth in activity.
The sub-index for output surged to 66.1, from 61.7 in May and the fastest pace of growth since March 2015.
"The kingdom’s non-oil private sector remained on a steeply upward growth trajectory by the end of the second quarter, as inflows of new business accelerated, particularly in construction and tourism activities," said Naif Al-Ghaith, chief economist at Riyad Bank.
"Yet this economic spike may contribute to increased inflationary pressures alongside reported increases in staff and construction material costs," Ghaith said.
The new orders sub-index rose to 69.5 in June, from 67.3 the month before, and was the highest recorded since September 2014, supported by strong demand and positive market conditions.
The Saudi government is pouring billions of dollars into developing non-oil sectors of the economy to diversify revenue sources away from hydrocarbons.
The leadership faces the additional challenge of expanding the private sector and creating jobs for a young population, two-thirds of which is under the age of 30.
"Ultimately, the government-backed investments, particularly in construction/infrastructure projects remain to be vital for business activity," Ghaith said, adding that sentiment for future activity remained positive.
