Thursday 13 December 2018
 
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OUTPUT, NEW ORDERS RECOVER

Saudi Arabia's non-oil growth hits 11-month high

RIYADH, 6 days ago

Saudi Arabia’s non-oil private sector witnessed its fastest growth rate in 11 months in November, according to the latest data from the Emirates NBD Purchasing Managers’ Index (PMI) for the kingdom.

The survey, sponsored by Emirates NBD and produced by IHS Markit, a world leader in critical information and analytics, contains original data collected from a monthly survey of business conditions in the Saudi Arabian private sector.

Khatija Haque, head of Mena Research at Emirates NBD, said: “The headline Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) rose to 55.2 in November from 53.8 in October, the highest reading this year. However, the PMI in November is still below the series average of 57.7, and the year-to-date average is lower than it was for Jan-Nov 2017, indicating a relatively soft rate of expansion in the non-oil private sector by historical standards.”
 
“Both output and new orders increased at a faster rate in November, and while new export order growth was firmer in November than it has been in recent months, it remained sluggish.  The recovery in new orders thus likely reflects stronger domestic demand.  However, some of the rebound in new order growth appears to be on the back of price discounting as well as increased marketing.

“Many firms surveyed indicated that competition for new work was strong, and as a result, selling prices were marginally lower on average last month.  Firms also indicated that they were increasingly focused on cost-savings.  As a result, expansion in both employment and purchasing activity slowed in November, despite stronger new order growth.  Input costs were broadly unchanged in November after declining slightly in October.  There was little evidence of wage inflation, with the staff costs index at 50.2 in November.

“Firms remained strongly optimistic about their output in the coming year, citing planned new products, increased marketing and more competitive prices; however, the ‘future output’ index slipped 2 points in November from the October peak,” she added.

Key findings of the November survey:

•    Headline PMI records highest reading in 2018 so far
•    Faster growth in output and new orders
•    Inflationary pressures curtailed by strong competition

Output growth recovered in November after having slipped to a six-month low in October, and was second-quickest observed in 2018 so far. Helping drive the upturn was stronger demand for goods and services. The main impetus continued to come from the domestic market, with new export orders rising only marginally and at a much slower rate than total new business.   

The latest survey indicated a modest monthly rise in employment, although the majority of firms reported unchanged headcount in November. Some firms reported hiring additional staff in marketing positions to help boost sales, while a rise in backlogs of work also pointed to pressure on operating capacity.

However, amid reports of strong competition, the survey highlighted efforts by businesses to control costs in order to facilitate lower selling prices. Prices charged decreased marginally in November following a rise the month before.  

On the cost front, there were negligible increases in purchase prices and average staff pay, as competition among suppliers and relatively low demand for new staff helped to constrain inflationary pressures.

Quantities of purchases among non-oil private sector firms increased at the slowest rate for six months in November. Lead times on purchases meanwhile improved, reflecting demands from businesses for faster deliveries.

Finally, business confidence towards the year-ahead outlook for activity remained strongly positive. Easing only slightly since October, the degree of optimism was the third-highest seen since April 2014. – TradeArabia News Service




Tags: Saudi Arabia | Emirates NBD | PMI | Non-oil private sector |

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