Saudi Arabia's non-oil business activity shrinks in March amid Iran war PMI shows

Saudi Arabia’s non-oil private sector activity contracted in March for the first time since August 2020, as the Iran war snarled up supply chains, a business survey ‌showed on Sunday.

The seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers’ Index (PMI), compiled by S&P Global, tumbled to 48.8 in March from 56.1 in ​February. Readings below 50 denote contracting activity.

Naif Al-Ghaith, Riyad Bank’s ​chief economist, said the drop into contraction territory was ⁠largely a reflection of short-term uncertainty linked to the geopolitical ​tensions in the region.

“The softer reading was mainly driven by a ​pause in new orders as clients adopted a more cautious stance. Export orders saw a notable pullback, with some firms reporting a temporary slowdown in ​cross-border activity. This led to a moderation in output,” Al-Ghaith ​said.

Output and new orders both shrank for the first time since August 2020 ‌when ⁠the COVID-19 pandemic brought economies worldwide grinding to a halt.

The new orders subindex plummeted to 45.2 in March from February’s 61.8.

Export demand weakened sharply, with new export orders posting their steepest ​fall in almost ​six years. Some ⁠firms said exports had been completely halted and others reported greater logistics problems.

Supply strains intensified even ​as demand weakened, a situation that may continue ​while the ⁠Strait of Hormuz waterway remains effectively blocked by the conflict.

But business expectations for the next 12 months remained in positive territory overall ⁠despite ​weakening to their lowest level since June ​2020, with some firms still confident over government spending, infrastructure development and improvement in ​demand over the longer term.