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PMI CLIMBS TO 18-MONTH HIGH

Saudi private sector growth momentum picks up

RIYADH, March 5, 2017

Saudi Arabia’s non-oil private sector saw a further pick up in growth momentum in February, with business conditions improving at the quickest rate since August 2015, a survey said.

Both output and new orders rose sharply in February, with the rate of expansion in the latter picking up to an 18-month high. Subsequently, firms raised their input buying at a steep pace to accommodate higher output and due to projections of further improvements in market demand in the coming months, said the Emirates NBD Saudi Arabia Purchasing Managers’ Index.

Despite the robust upturn in new work, the rate of job creation remained only slight, however. On the price front, ongoing cost pressures led firms to raise their output charges for the fourth consecutive month.

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 private sector.

Commenting on the Emirates NBD Saudi Arabia PMITM, Khatija Haque, head of Mena research at Emirates NBD, said: “Faster output and new orders were the main driver behind the higher PMI reading in February, signalling faster growth in the non-oil private sector last month.  However this has yet to translate into increased employment in the sector.  Nevertheless, firms appear to be relatively optimistic about prospects for the coming year.”

Key Findings
* Output continues to rise sharply
* New order growth reaches 18-month record
* Output charges increase only modestly, despite stronger rise in input costs

At 57.0, the headline seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) – a composite gauge designed to give a single-figure snapshot of operating conditions in the non-oil private sector economy – was consistent with a marked improvement in operating conditions during February. Up from 56.7 in January, the latest reading was also the highest in one-and-a-half years. However, it remained slightly below the long-run series average (58.3).

The overall improvement in the health of the sector was supported by sharper growth of new work during February. In fact, the latest increase in new business was the steepest seen in one-and-a-half years. Anecdotal evidence highlighted that promotional activities, new projects, construction activity and stronger underlying demand had supported the upturn in new work. Higher new export orders also contributed to growth of total new business. The latest increase in new work from abroad was the most marked in six months.

Reflective of the trend seen for incoming new business, output expanded sharply, although the rate of growth softened slightly since January.

Purchasing activity also increased markedly in February. As a result, stocks of purchases continued to expand at a solid pace.

The rate of job creation eased to a 14-month low and was slight overall. Marginal employment growth has now been recorded in each of the past six months. Consequently, backlogs of work accumulated at the fastest rate in 20 months, the survey said.

Higher raw material costs was reportedly the primary factor behind another increase in total input costs as wage inflation remained comparatively mild. Subsequently, charges increased for the fourth straight month in February. The rate of output charge inflation was modest, however. According to panellists, competitive pressures had restricted firms’ abilities to pass on higher input costs to clients. - TradeArabia News Service




Tags: Saudi Arabia | growth | Private |

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