Saudi nonoil private sector growth picks up in November

Khatija Haque
Khatija Haque

Khatija Haque

Faster growth of new work helped Saudi Arabia’s nonoil private sector to regain some momentum during November.

The overall improvement in business conditions was also supported by further expansions in output, employment and stocks of purchases. That said the respective rates of growth all eased fractionally since October.

Meanwhile, data for prices showed divergent trends, with charges falling despite further inflationary pressure from input costs. Companies suggested that this was due to stronger competition.

The survey, sponsored by Emirates NBD and produced by Markit, contains original data collected from a monthly survey of business conditions in the Saudi private sector.

Commenting on the Emirates NBD Saudi Arabia PMI, Khatija Haque, head of MENA Research at Emirates NBD, said: “The improvement in the Saudi PMI last month is encouraging, particularly against a backdrop of sustained low oil prices and an announced freeze in government spending at the start of Q4. The faster growth in new orders and new export orders in November, and continued strength in output, suggests that both domestic and external demand are supportive of nonoil growth even as momentum has slowed from 2014. We expect that the rise in oil production this year helped to support manufacturing, underpinning activity in the nonoil sectors of the economy.”

Adjusted for seasonal factors, the headline Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) — a composite gauge designed to give a single-figure snapshot of operating conditions in the nonoil private sector economy — posted 56.3 in November, up from 55.7 in October. The latest reading pointed to an upturn in growth from the record low seen in the prior month, but it was still one of the lowest recorded in the series history.

Underpinning the pick-up in growth momentum was a sharper rise in new orders placed with Saudi Arabia’s nonoil private sector firms. The rate of expansion quickened to a three-month high, supported by a marked increase in new export business. Panelists indicated that better marketing had resulted in new client wins both domestically and abroad.

Higher new work contributed to another sharp rise in output during November. The rate of growth eased for the third straight month, however, and was slower than the long-run trend.

Reflective of greater business requirements, payroll numbers increased for the twentieth consecutive month in November. That said, with the vast majority of the panel (95 percent) noting no change in employment, the pace of hiring was only modest overall. Concurrently, pressure on capacity remained, despite the respective index for backlogs slipping to a recent low.

In contrast, purchasing activity rose more quickly in November. According to respondents, input buying was raised in line with growth of new business. Stocks of purchases also increased, though the rate of inventory building moderated to the weakest in nearly a year.

On the price front, both salaries and purchasing costs increased in November. As a result, total input costs continued to rise, extending the current sequence, which has run throughout the series history. The overall rate of inflation eased, however, and was muted in comparison with historical data.


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