Saudi non-oil private sector registered solid improvement in its business activity during August with firms reporting higher employment levels and an accelerated pace in growth, said a report.

The Saudi Arabia purchasing managers’ index (PMI) compiled by Saudi British Bank (SABB) and HSBC signalled a further improvement in operating conditions at the kingdom’s non-oil producing private sector firms.

The PMI reflects the economic performance of the Saudi non-oil producing private sector companies through the monitoring of a number of variables, including output, orders, prices, stocks and employment.

As has been the case throughout the PMI survey history to date, operating conditions in Saudi Arabia’s non-oil producing private sector strengthened during August, said the SABB monthly report.

The headline PMI rose to a four-month high of 57.5 in August, up from July’s 56.6. Operating conditions have improved in every month of the survey history to date, it added.

According to SABB, the output rose at an accelerated pace in August, as 22 per cent of survey respondents reported higher activity.

"Increased business was repeatedly mentioned as the main driver of the latest expansion. In line with stronger output growth was a solid rise in order intakes. The latest increase was partly driven by improved market conditions, and increased marketing and sales efforts."

The growth was the sharpest since April. Meanwhile, client demand from foreign markets also strengthened, the report added.

Driven by higher purchase prices and increased staff costs, input prices in Saudi non-oil producing private sector increased at a sharp rate. According to anecdotal evidence, the rise in purchase prices was partly attributed to general economic pressures and increased market demand.

In contrast to an accelerated increase in input costs, Saudi’s non-oil private sector companies lowered their charges responding to increased market competition, revealed the SABB report.

Selling prices fell for the second month in succession, and at the second-sharpest rate in the 49-month series history, the report stated.

As has been the case for most of the survey history to date, employment levels rose in August. Companies that hired additional workers often commented on higher production requirements, it added.

According to SABB, the backlogs of work accumulated at the fastest pace in a year-and-a-half in August, with almost 12 per cent of panel members indicating higher volumes of unfinished work. Panellists linked the rise in incomplete orders to higher business, it stated.

The SABB/HSBC Index signaled an increase in sales, which was the main driver for the latest rise in purchasing activity at the non-oil producing private sector companies.

The latest rate of increase was in line with that seen in July. Concurrently, stocks of purchases accumulated at the weakest pace since December 2011, with the vast majority of survey respondents indicating unchanged inventory levels, said the report.

"Suppliers’ delivery times shortened again in August. Survey respondents often linked the improvement to increased market competition," it added.-TradeArabia News Service