DUBAI, April 7 (Reuters) - Saudi Arabia's non-oil private sector continued to grow in March, while employment contracted for the first time in five years, a monthly survey of companies showed on Sunday.
The seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers' Index rose to 56.8 in March from 56.6 in February. A reading above 50 indicates expansion and below that contraction.
The Saudi private sector struggled last year because of fuel price hikes, the introduction of a 5 percent value-added tax and higher fees for hiring foreign workers.
But private sector growth picked up pace this year. It rose to a 13-month high in January and continued to gain momentum -- though only marginally -- through February and March.
The improvement in March was led by a continued rise in new business, the highest since April 2015, the PMI showed.
The new orders sub-index rose to 65.5 in March, an almost four-year high, while the output sub-index rose to a seven-month high of 59.6, up marginally from 59.2 in January.
But "the rebound in new orders and business output in recent months has not fed through to job growth, with private sector employment declining for only the third time in the series history last month," said Khatija Haque, head of MENA research at Emirates NBD.
The small decline in the employment sub-index, to 49.8, marked the end of a five-year run of continuous job creation.
"There also appears to be very little pricing power for firms, with selling prices declining (albeit only marginally) for the fifth month in a row," Haque said.
(Reporting by Nafisa Eltahir; Editing by Catherine Evans)
