Saudi non-oil business: August PMI signals stronger upturn

Saudi Arabia’s non-oil private sector continued on its upward trajectory in August, with business conditions improving to the greatest extent in a year, according to a new report. 

Output and new business remained the key growth drivers — both rose sharply and more quickly than in July. Employment and input stocks also increased, with a number of companies looking to expand capacity in line with rising workloads. 
Meanwhile, price pressures intensified in August. The rate of cost inflation accelerated to a 10-month high, which led panellists to raise their charges. The rise in selling prices was only modest, however. 
The survey, sponsored by Emirates NBD and produced by IHS Markit, contains original data collected from a monthly survey of business conditions in the Saudi private sector.
Commenting on the Emirates NBD Saudi Arabia PMI, Khatija Haque, head of MENA Research at Emirates NBD, said. “The rise in the Emirates NBD Saudi Arabia PMI to the highest level in a year is encouraging, although we note that the average PMI so far this year is still below 2015, indicating a slower rate of private sector growth.” 
Haque said: “Stronger export demand has helped support overall new orders, and more firms have increased hiring in August as well. Record high oil production in July and August likely supported activity in the manufacturing sector over the summer.” 
The headline seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) — a composite gauge designed to give a single-figure snapshot of operating conditions in the non-oil private sector economy – signalled a further acceleration in growth during August. 
Up from 56.0 in July to 56.6, the latest reading was a one-year high. That said, whereas business conditions improved strongly in the context of recent data, the index was still below its long-run series average (58.5).
Data pointed to another substantial rise in output during August. The rate of expansion picked up slightly since July, and was the most marked in nearly a year.
Activity was bolstered by a further improvement in underlying demand, which was in turn reflected by faster growth of new business. 
The latest increase was the quickest since last November. 
As well as stronger demand, firms commented on new projects and enhanced marketing strategies.
Total new work was supported by gains across international markets in August. New export orders rose for the second successive month and at the strongest pace so far in 2016.
On the jobs front, the rate of hiring accelerated to an 11-month high. Panellists indicated that they had raised employment in response to greater business requirements. However, the rise in staff levels was only moderate overall, and insufficient to prevent an accumulation of backlogs. The amount of unfinished work rose for the first time in three months.
With output and new orders increasing markedly, purchasing activity rose further in August. 
The pace of growth quickened to an 11-month high, ensuring that input stocks continued to build up.
Firms upped their quantities of purchases in spite of higher costs during August. 
Purchase prices rose at the fastest pace since last October and, combined with greater salaries, led to a pick-up in the overall rate of cost inflation.
Increased costs contributed to a rise in charges set by Saudi Arabia’s non-oil private sector businesses. 
The rate of inflation was strong relative to the past two years, but still weaker than the average over the survey’s entire history.

Source: Arab News