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Thu 3 Oct 2019 10:34 AM

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Business conditions in Saudi Arabia's non-oil economy improve

In the UAE, however, the pace of improvement of the non-oil sector economy slowed for a fourth consecutive month

Business conditions in Saudi Arabia's non-oil economy improve
According to the data, output expanded at the fastest pace since December 2017, allowing firms to take on additional staff at the most marked rate in 18 months.

Business conditions in Saudi Arabia’s non-oil private sector improved at the fastest rate in three months, bolstered by new domestic and international business, according to IHS Markit.

According to the data, output expanded at the fastest pace since December 2017, allowing firms to take on additional staff at the most marked rate in 18 months.

IHS noted that input cost inflation was the sharpest recorded in the last year, amid purchasing prices and staff costs. The seasonally adjusted Saudi Arabia Purchasing Managers’ Index (PMI) was the highest in three months, indicating a sustained improvement in growth momentum.

Output across the non-oil private sector rose the most since December 2017, bolstered by stronger underlying demand conditions reported from surveyed businesses.

In contrast, inflows of new business increased at the slowest pace in nine months, although the rate of expansion was still sharp.

Additionally, the rate of growth of new order exports accelerated in August, with anecdotal evidence suggesting that that companies had seen an improvement in foreign demand conditions.

“Moreover, non-oil private sector firms south to add to their payrolls at the most marked pace in 18 months buoyed by efforts to improve the quality of product offerings,” said IHS Market economist Amritpal Virdee. "October data will provide the first opportunity to gauge the impact of the recent attacks on the critical oil processing facilities in Abaqaiq and Khurais on the wider economy.”

Softer pace

In a separate report, IHS Markit found that the UAE’s non-oil private sector economy improved at a softer pace for the fourth consecutive month, with output growing remaining relatively weak amid the slowest increase in new orders in the series history.

Firms responded to the trends with another round of price discounting, despite a stronger increase in overall input cost and only a marginal rise in purchasing activity.

The UAE’s PMI continued a downward trend after recording relatively high readings earlier in the year. The new figures are the weakest improvement in the health of the private sector since May 2010.

Companies noted that slowing market conditions led to a reduction in customer orders during the month, the report added. The slowdown was further evident in foreign sales, which grew at the most subdued pace since February.

As a result, UAE companies reported another relatively weak uplift in private sector output during September. The expansion was slightly faster than in August, but was the second-softest in over six years. Nevertheless, a marginal rise in demand, as well as greater marketing activity, contributed to a solid increase in output overall.

"The UAE non-oil economy continued to lose steam at the end of the third quarter of 2019,” said IHS Market economy David Owen. “After comparatively strong demand growth earlier this year, September data signalled the weakest monthly upturn in new orders in the survey history. Companies reported further competitive pressures, while also seeing a slowdown in customer movement despite sustained price discounting.”

"With this in mind, businesses were more downbeat towards the one-year outlook,” he added.

“Sentiment eased to the lowest in seven months, but was still stronger than the series average, with the Expo 2020 remaining a key source of optimism among panellists."