Prices charged for goods and services rise but job creation remains static
The Emirates NBD Purchasing Managers’ Index for Saudi Arabia climbed to a 17-month high of 57.3 in May – up from 56.8 in April.
The index, which shows conditions in the non-oil private sector economy, has increased in the Kingdom in six of the last eight months.
It showed a sharp rise in output – the most since December 2017 – buoyed by stronger underlying demand conditions, according to reports from surveyed businesses.
Inflows of new business also increased steeply, with the rate of growth reaccelerating and running at one of the fastest seen over the past four years. This partly reflected a further pick-up in export orders, which rose at the quickest pace since February 2017.
However, job creation across the non-oil private sector remained lacklustre. May’s rise in employment was the greatest since January but only marginal and was consistent with signs of relatively low pressure on business capacity, as evidenced by only weak growth in backlogs of work.
Firms across the non-oil private sector scaled up their purchasing activity during May to support increased output requirements. Growth in buying levels reached the strongest since late-2017 as a number of firms looked to bolster stock levels amid expectations of higher demand.
Confidence among non-oil private sector firms towards future output remained strong in May, linked to positive forecasts for underlying economic conditions and plans for improved products and services. The degree of optimism did, however, ease since April, when it was close to the highest in over five years.
On the price front, latest data showed an increase in charges for goods and services for the first time in seven months. The modest rise in selling prices followed a near-record fall in April and, according to anecdotal evidence, was driven by a combination of higher costs and stronger demand.
Though overall input prices rose the most since last December, the rate of inflation was still subdued by historical standards, with both purchasing costs and wages up only slightly on the month.
Khatija Haque, Head of MENA Research at Emirates NBD, said: “The gradual rise in the headline PMI this year suggests that growth in the kingdom’s non-oil private sector is recovering after a relatively soft 2018. Other indicators, such as an improvement in private sector credit growth and rising point of sale transactions in the first quarter of this year are consistent with a modest rebound in private sector activity.”