DUBAI (Reuters) - Growth in non-oil business activity in Saudi Arabia eased in May as new orders rose at the slowest pace in 25 months, a survey showed on Tuesday.
The seasonally-adjusted Riyad Bank Saudi Arabia Purchasing Managers' Index fell to 56.4 in May, from 57.0 the previous month, and was the second lowest reading in 22 months. A reading above 50 marks growth in activity.
The output sub index slipped to 60.1, its lowest level since January and down from 61.9 in April, although it remained firmly in expansion mode, with growth supported by demand and the completion of pending orders.
The sub index for new orders hit its lowest level in just over two years at 59.5, down from 61.0 in April, with slowing market conditions and increased competition cited as reasons for the deceleration.
Overall numbers, though, continue to indicate strong demand for non-oil sectors which are a top priority as the kingdom weans itself off an oil dependency and has accelerated policies to drive investment into tourism and construction and expand the private sector.
"However, the surge in demand has also led to price pressures impacting input prices and staff costs, although the increase in output prices has been observed at a slower pace," said Naif Al-Ghaith, Riyad Bank's chief economist.
"This balancing act reflects the challenges faced by businesses in managing costs while trying to capitalize on the expanding market," he added.
Confidence among businesses about the 12-month business outlook dropped in May to the weakest level since January.