April 5 (Reuters) - Saudi Arabia's non-oil private sector activity contracted in March for the first time since August 2020, as the war in the Middle East 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.
(Reporting by Reuters; Editing by Hugh Lawson)
