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Wed 3 Aug 2011 05:44 PM

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Saudi private firms see growth slowdown in July

Latest data shows noticeably weaker rises in both output, new orders while job creation moderates

Saudi private firms see growth slowdown in July
Job creation moderated in Saudi Arabia in July amid a slowdown for private companies.

A sharp slowdown in the rate of expansion of Saudi Arabia's non-oil private sector economy was seen at the start of the third quarter of the year, according to the latest data.

The Saudi British Bank (SABB) HSBC Saudi Arabia Purchasing Managers' Index (PMI) for July showed noticeably weaker rises were recorded in both output and new orders, while job creation also moderated.

The monthly report reflects the economic performance of Saudi Arabian non-oil producing private sector companies and establishments through the monitoring of a number of variables, including output, new orders, exports, input prices, output prices, quantity of purchases, stocks and employment.

The headline seasonally adjusted PMI registered a 10-month low of 60 in July (down from 62.8 in June).

Nevertheless, the PMI remained comfortably above the neutral mark of 50.0, suggesting that business conditions continued to improve.

The kingdom's non-oil private sector companies recorded further growth of new business in July, which respondents linked to favourable market conditions, good demand and new product launches, the PMI said.

However, the rate of expansion slowed noticeably from June's near-record high to a nine-month low. This was despite a faster increase in new export business. New work from abroad rose at an unprecedented rate in the latest survey period.

In line with a weaker trend in new order growth, output rose at a much slower pace during July.

To manage current workloads and company expansions, as well as to comply with the government's new Nitaqat system, firms recruited additional workers in July, the Index said.

Employment rose solidly, but at a milder rate than in the previous four months.

Buying activity also increased at a much slower rate in July, reflecting an easing trend in new order growth. Input stocks continued to rise solidly.

Respondents reported longer lead times in July for the first time in the survey history. Firms blamed greater demand for inputs, low manpower at suppliers and payment problems for delays.

Input price inflation was broadly stable in July, as a sharper rise in staff costs was outweighed by a slowdown in purchase price inflation.

According to the report, companies took advantage of favourable demand conditions to pass through some of their increased input costs to customers in July. Charges rose solidly as a result, but at the slowest pace for five months.

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