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Saudi firms remained optimistic towards future growth.
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Saudi non-oil private sector growth slows

DUBAI, October 3, 2018

Saudi Arabia witnessed slower private sector growth in September with new export orders contracting during the month, said the latest Emirates NBD  Purchasing Managers’ Index.
The headline Saudi PMI declined to 53.4 in September from 55.1 in August, the lowest reading since May.  The decline was due to softer growth in output and new orders, with new export orders contracting last month.  Employment and inventory growth were also weaker in September, weighing on the headline PMI, said Khatija Haque, head of Mena Research at Emirates NBD.  
Despite a weaker expansion in September, companies remained optimistic towards future growth prospects. According to anecdotal evidence, new project wins underpinned positive sentiment. The overall level of confidence was at a four-month high, the survey said.
The survey, sponsored by Emirates NBD and produced by IHS Markit, contains original data collected from a monthly survey of business conditions in the Saudi Arabian private sector.
“The employment index fell to 50.7 in September, the lowest since November 2017, as nearly 97 per cent of firms surveyed indicated ‘no change’ in staffing last month.  Staff costs (a proxy for wages) declined marginally for the first time April 2016.  Firms also cut selling prices for the third month in a row in September even as input costs rose.  However, the rate of producer price inflation eased from August.
“Despite the relative softness in the September survey, the PMI for Q3 was higher than both Q1 and Q2 2018, with output and new work rising at a faster rate than in the first half of this year.  However, this did not translate into faster employment growth and staff costs were flat on average in Q3.  Margin pressure is evident as input costs have increased while selling prices have declined slightly.  Nevertheless, the data does suggest that Q3 non-oil GDP growth was stronger than H1 2018," the survey said.
“The September survey data points to slower growth in the non-oil private sector in last month, which is surprising given the backdrop of rising oil prices and sharply higher oil production since June.  However, we remain optimistic that sustained higher oil production will support faster expansion in the non-oil sectors in Q4, particularly manufacturing, transport & logistics.  This view appears to be shared by the majority of firms surveyed, as nearly 39% of firms surveyed expect their output to be higher in 12 months, the most since the May survey.”    
The main findings of the September survey were as follows: 
• Headline PMI slips to four-month low of 53.4 in September in part due to slower improvements in output and new orders
• Price pressures soften
At 53.4 in September, down from 55.1 in August, the headline seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers’ Index -- a composite gauge designed to give a single-figure snapshot of operating conditions in the non-oil private sector economy – registered a four-month low and was well below the historical average during the latest survey period. Nonetheless, the figure remained above the neutral 50.0 threshold in September. 
Output across the non-oil private sector increased at a slower rate during September, as inflows of new orders also slowed, according to anecdotal evidence. The rate of growth in output eased to the lowest seen since April, and registered below the long-run average. 
Client demand for goods and services across Saudi Arabia’s non-oil private sector rose during September, thereby extending the current sequence of growth to five months. That said, the rate of growth eased in the latest survey, with September’s rise being the second-weakest in the aforementioned period. Furthermore, new export orders deteriorated for the first time since May.
Partly in response to easing new order growth, backlogs of work at non-oil private sector companies increased at the slowest pace in four months. The rate of build-up was slight overall.
On the price front, input price inflation eased to a four-month low in September amid falling wage bills. Meanwhile, non-oil private sector companies lowered their selling prices for the third month in a row during the latest survey period.
Job creation was marginal overall in September. Panellists that reported an increase linked this to higher output requirements. The rate of job growth eased to a ten-month low in the most recent survey and well below the series’ historical average, te survey said. -TradeAraabia News Service

Tags: Saudi | Private sector | PMI | confidence |

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