Saudi private sector growth hits 2018 high in November

Saudi Arabia's non-oil private sector grew at its fastest rate this year in November
Saudi private sector growth hits 2018 high in November
The Emirates NBD Purchasing Managers’ Index (PMI) for Saudi Arabia rose to 55.2 in November from 53.8 in October, the highest reading this year.
By Sam Bridge
Thu 06 Dec 2018 02:35 PM

Saudi Arabia’s non-oil private sector grew at its fastest rate this year in November, as the economy show signals that it is recovering from austerity measures imposed at the start of 2018.

The Emirates NBD Purchasing Managers’ Index (PMI) for Saudi Arabia rose to 55.2 in November from 53.8 in October, the highest reading this year.

However, the PMI in November is still below the series average of 57.7, and the year-to-date average is lower than it was for the same period in 2017, indicating a relatively soft rate of expansion by historical standards.

Khatija Haque, head of MENA Research at Emirates NBD, said: “Both output and new orders increased at a faster rate in November, and while new export order growth was firmer in November than it has been in recent months, it remained sluggish.

"The recovery in new orders thus likely reflects stronger domestic demand. However, some of the rebound in new order growth appears to be on the back of price discounting as well as increased marketing.

“Firms remained strongly optimistic about their output in the coming year, citing planned new products, increased marketing and more competitive prices; however, the ‘future output’ index slipped 2 points in November from the October peak.”

Output growth recovered in November after having slipped to a six-month low in October, and was second-quickest observed in 2018 so far.

Helping drive the upturn was stronger demand for goods and services. The main impetus continued to come from the domestic market, with new export orders rising only marginally and at a much slower rate than total new business.

The latest survey indicated a modest monthly rise in employment, although the majority of firms reported unchanged headcount in November. Some firms reported hiring additional staff in marketing positions to help boost sales, while a rise in backlogs of work also pointed to pressure on operating capacity.

However, amid reports of strong competition, the survey highlighted efforts by businesses to control costs in order to facilitate lower selling prices. Prices charged decreased marginally in November following a rise the month before.

On the cost front, there were negligible increases in purchase prices and average staff pay, as competition among suppliers and relatively low demand for new staff helped to constrain inflationary pressures.

Quantities of purchases among non-oil private sector firms increased at the slowest rate for six months in November. Lead times on purchases meanwhile improved, reflecting demands from businesses for faster deliveries.

Business confidence towards the year-ahead outlook for activity remained strongly positive. Easing only slightly since October, the degree of optimism was the third-highest seen since April 2014.

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