Increases in both output and new orders contributed to the growth
Saudi Arabia’s non-oil private sector ended 2017 with a sharp improvement in business conditions, according to the adjusted Emirates NBD Saudi Arabia Purchasing Manager’s Index.
The index – a composite gauge designed to give a single-figure snapshot of operating conditions in the non-oil private sector economy – fell fractionally to 57.3 during December, from 57.5. Overall, however, the latest figure showed that expansion remained steep and above 2017’s average.
Additionally, non-oil private sector companies in Saudi Arabia continued to report steep rates of expansion in output, with anecdotal evidence suggesting that domestic demands and an increase in orders from neighbouring countries has contributed to higher output requirements.
Inflows of new business to Saudi non-oil private sector firms were also found to have increased over the course of December. While the expansion was sharp, it remained below the historical average, according to Emirates NBD.
New export orders also expanded at the fastest rate since August, which extended the current sequence of growth to five months. Additionally, non-oil private sector companies continued to hire more staff in December, although at a slower rate than the series’ long-run average.
Average cost burdens in Saudi Arabia were found to have risen significantly during August, and increased demand for raw materials led to higher prices. Despite rising input costs, selling prices only rose at a fractional pace overall amid competitive pressures in the non-oil private sector.
On a negative note, business confidence towards future growth prospects was found to have declined slight, even while remaining generally optimistic. An upturn in business conditions and increased marketing activity were expected to underpin output growth in the next year.
“The December PMI survey continued to show a strong rate of expansion in December, and the data suggests that non-oil growth accelerated in the final quarter of 2017, as well as for the year as a whole compared to 2016,” said Khatija Haque, head of MENA research at Emirates NBD.
“Nevertheless, we expect headline GDP growth to be close to zero in 2017 as substantial oil production cuts will offset the expansion in the non-oil sectors of the economy.
"We are more optimistic about growth prospects in 2018 however,” he added.