Saudi Arabian non-oil private sector growth continued in September but the rate of improvement in business conditions was much reduced compared to previous years, according to a new survey.
Data from the Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) showed that the main reason for this was slower growth of new business with the latest rise among the least marked ever recorded.
The rate of hiring also eased, although output rose sharply again. Prices data suggested that sector conditions were tightening. Both charges and purchase costs decreased amid intense competition, the latter falling for the first time in the series history.
At 55.3, the headline seasonally adjusted Emirates NBD Saudi Arabia PMI sank to its lowest reading of the third quarter in September.
Down from August’s one-year high of 56.6, the latest figure was well below the long-run trend (58.5). That said, growth across the third quarter on average (55.9) was the strongest since Q3 2015.
Khatija Haque, head of MENA Research at Emirates NBD, said: “Saudi Arabia’s PMI eased only slightly in September, on weaker new order growth. However, the average PMI for Q3 2016 points to a faster rate of expansion in economic activity compared to the first half of this year.
"Recent announcements on spending cuts in the kingdom are likely to weigh on household consumption and consumer confidence however, as we head into Q4.”
Growth of new work eased substantially in September. The rate of expansion was only marginally faster than April’s survey-record low. Some companies reported a downturn in underlying demand. On the other hand, those were far outweighed by panellists who saw new business gains on the back of better marketing and discounted prices. New export orders rose for the third straight month, albeit modestly.
Output remained the key driver of growth of the sector as a whole, the survey showed. The latest rise was sharp overall, with firms commenting on a general improvement in market conditions.
Purchasing activity also rose markedly in September, although the rate of expansion eased in line with slower new order growth.
With new orders and input buying rising more slowly, competition around pricing intensified as companies sought to attract new clients. Purchase costs dropped for the first time since data collection started more than seven years ago. Charges also declined, albeit fractionally.
Saudi Arabia’s non-oil private sector businesses took on extra staff for the 13th month in a row during September but the rate of hiring was only modest, according to the survey.
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