Loss of growth momentum in December sees business conditions improve at weakest pace since 2009
Saudi Arabia’s non-oil private sector suffered a loss of growth momentum at the end of 2015, with business conditions improving at the weakest pace in the survey’s history.
Weighing on the sector were slower expansions in output, new orders and employment, according to the Emirates NBD Saudi Arabia Purchasing Managers' Index which started in 2009.
The survey, sponsored by Emirates NBD and produced by Markit, also showed that staffing levels, in particular, barely rose in December. That said, growth rates for activity and new work remained sharp overall.
Despite falling from 56.3 in November to 54.4, the headline Emirates NBD Saudi Arabia PMI remained indicative of solid growth in December. However, the latest reading was a series low, and meant that the average for Q4 2015 was also the weakest on record (55.4).
Meanwhile, data for prices highlighted the impact of increased competition on both input costs and output charges. Cost pressures were the least marked since the survey began in 2009, while tariffs fell for the second month running.
Khatija Haque, head of MENA Research at Emirates NBD, said: “The latest PMI data show that although growth momentum has slowed in Q4 2015, the non-oil private sector still expanded at a solid rate at the end of last year.
"This is consistent with the official estimate for non-oil private sector growth of 3.7 percent, which was released with the 2016 budget at the end of December.”
The cooling in the overall rate of expansion was reflected by softer output growth in December. The latest rise was the slowest since January, although it remained steep overall. Anecdotal evidence linked higher activity to new projects secured as a result of better marketing.
New business showed a similar trend in December, with growth still marked but easing to the weakest in the series history. The intensity of competition was reportedly a factor restricting new order growth at some firms, although respondents indicated that this was far outweighed by the gains from promotional activities.
New export work continued to rise solidly, with some firms benefitting in international markets due to their reputations for quality, the survey showed.
It added that relatively slow growth of new work led companies to raise their purchasing activity at the weakest pace in more than two years. That said, the rate of expansion was still sharp overall, and sufficient to contribute to a further build-up of input stocks in December.
On the jobs front, the rate of hiring eased to near-stagnation at the end of the fourth quarter. It was the weakest in the current 21-month period of expansion, with the vast majority of respondents (97 percent) seeing no change in employment.