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Tue 5 Dec 2017 01:21 PM

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Saudi private sector growth rises by most since August 2015

Emirates NBD Saudi Arabia PMI reveals significant economic improvement in November

Saudi private sector growth rises by most since August 2015

Growth in the Saudi Arabia non-oil private sector saw its steepest improvement since August 2015 in November, according to new research.

November data from the Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) signalled a strong upturn, driven by output and new order expansions.

The headline seasonally adjusted PMI rose to 57.5 in November, from 55.6 in October. This figure indicated the steepest improvement in the non-oil private sector for 27 months.

Meanwhile, foreign demand improved at a modest pace and job creation continued. On the price front, cost burdens rose moderately, whilst output prices were unchanged since October amid strong competition in the sector.

Business confidence remained positive, albeit the level of sentiment fell slightly since the preceding survey.

Khatija Haque, head of MENA Research at Emirates NBD, said: “The strong November PMI reading is particularly encouraging given the heightened political uncertainty in the Kingdom, and indicates that it was largely 'business as usual' last month. 
"That output and new orders continued to increase sharply bodes well for non-oil sector growth in the fourth quarter.  Higher oil prices likely contributed to the broadly positive business sentiment.”  

Output continued to increase, in line with the survey’s trend. The rate of growth was sharp overall and accelerated to a ten-month high in November. According to anecdotal evidence, the upturn in business activity was supported by strong domestic demand.

Growth of new business accelerated during November, with the respective index hitting a 27-month high. The improvement in new work inflows was reported by 37 percent of respondents.

New export order growth reached a three-month high during November. Non-oil private sector firms commonly linked the rise in new orders from abroad to an economic upturn in neighbouring countries.

Job creation continued in November, extending the current sequence of hiring to 44 months. That said, the rate of increase eased since October, in contrast to the trends for output and new orders.

In terms of prices, input cost inflation eased, with the respective index recording below the series long-run average. Softer increases in both purchase prices and staff costs were recorded.

Despite the ongoing increases in cost burdens, output charges were unchanged. Some panel members reported higher selling prices, however these were offset by those discounting their  charges for goods and services in response to strong competition.

Stocks of purchases were accumulated at the second-fastest rate in the survey’s history in November. Firms noted that increasing demand had led them to build-up their inventories.

Optimism towards future growth prospects softened in the latest survey. That said, business confidence remained positive overall. The ongoing economic upturn alongside higher business investments underpinned the positive outlook.