The business activity in Saudi Arabia's non-oil private sector remained strong in February with steady growth in both output and new orders across the Kingdom, according to a new report.

The job creation was solid, while purchasing cost picked up to new series record high, said Saudi British Bank (SABB) and HSBC in their Purchasing Managers’ Index (PMI) for February.

The PMI  2011 – a monthly report issued by the bank and HSBC- reflects the economic performance of Saudi non-oil producing private sector companies and firms through the monitoring of a number of variables, including output, new orders, exports, input prices, output prices, quantity of purchases, stocks and employment.

Business conditions in this sector remained favourable in February, supporting further strong expansions in new business and activity, as well as continued growth of employment. However, input prices picked up to a series record peak, it added.

The headline PMI fell to 63.4 in February from January’s record of 63.8, said the SABB statement.

Receipts of new work continued to grow in February, and at a considerable rate. Respondents stated that improved market conditions, and competitive prices helped to support demand for the sector’s goods and services, the PMI report said.

The latest figure pointed to another sharp improvement in the health of Saudi Arabia’s non-oil private sector, it added.

However, the rate of increase eased since January. New export orders rose at a weaker rate than total new business, suggesting that domestic demand remained the key driver of expansion, said the PMI report.

To keep up with rising new order levels, these Saudi firms took on additional staff, increased purchasing and built up stocks in February.

The rate of job creation was solid and little-changed since January, while both buying activity and input holdings grew strongly (albeit to lesser extents than in the previous month). Reports indicated that some input purchases were made to hedge against future commodity price inflation.

'Lead times on deliveries of raw materials and semi-finished goods shortened again in February. Vendor performance has improved in each month of the survey’s history. Panellists linked faster deliveries to competition amongst suppliers and efficient service,' said the SABB report.

Maintaining the series trend, prices paid for inputs by Saudi Arabian non-oil private sector firms rose in February, it added.

To motivate staff in the face of rising workloads and increased living costs, companies raised wages and salaries during the latest survey period. Staff cost inflation rose to a modest pace as a result, the SABB report said.

In order to compensate for input price inflation, and also to take advantage of strong market demand, firms raised their tariffs in February. Charges increased at a moderate pace, but to a lesser extent than in January, it added.-TradeArabia News Service