Saudi Arabian non-oil private sector growth continued in September, although the rate of improvement in business conditions was much reduced compared to previous years, said a report by Emirates NBD.

The main reason for this was slower growth of new business – the latest rise was among the least marked ever recorded by the survey. The rate of hiring also eased, although output rose sharply again, the Emirati lender stated in its Saudi Arabia Purchasing Managers’ Index (PMI).

Prices data suggested that sector conditions were tightening. Both charges and purchase costs decreased amid intense competition, the latter falling for the first time in the series history, said the survey, sponsored by Emirates NBD and produced by IHS Markit.

The Saudi PMI contains original data collected from a monthly survey of business conditions in the Saudi private sector.

Commenting on the report, Khatija Haque, the head of Mena Research at Emirates NBD, said: "Saudi Arabia’s PMI eased only slightly in September, on weaker new order growth. However, the average PMI for Q3 2016 points to a faster rate of expansion in economic activity compared to the first half of this year."

According to her, the recent announcements on spending cuts in Saudi Arabia are likely to weigh on household consumption and consumer confidence however, as the nation heads into Q4.

The key findings of the report are that the output has risen sharply again but new business growth has eased close to record low. Another key revelation was that the purchase costs fell for first time in series history amid competitive pressures.

At 55.3, the headline seasonally adjusted Emirates NBD Saudi (PMI) sank to its lowest reading of the third quarter in September. Down from August’s one-year high of 56.6, the latest figure was well below the long-run trend (58.5).

That said, growth across the third quarter on average (55.9) was the strongest since Q3 2015, noted Haque.

The rpeort poi nted oput that the growth of new work eased substantially in September. The rate of expansion was only marginally faster than April’s survey-record low.

Some companies reported a downturn in underlying demand. On the other hand, those were far outweighed by panellists who saw new business gains on the back of better marketing and discounted prices. New export orders rose for the third straight month, albeit modestly.

Output remained the key driver of growth of the sector as a whole. The latest rise was sharp overall, with firms commenting on a general improvement in market conditions. That said, put in the context of historical data, the respective index pointed to a relatively subdued increase, according to Emirates NBD report.

Purchasing activity also rose markedly in September, although the rate of expansion eased in line with slower new order growth. The pace of pre-production inventory building was meanwhile unchanged, as panellists continued to accumulate stocks in an effort to ensure projects could be completed on time, it stated.

With new orders and input buying rising more slowly, competition around pricing intensified as companies sought to attract new clients. Purchase costs dropped for the first time since data collection started more than seven years ago, it added.

According to Haque, Saudi Arabia’s non-oil private sector businesses took on extra staff for the thirtieth month in a row during September.

"The rate of hiring was only modest, however. It was also insufficient to lift pressure on operating capacity. Backlogs rose for the second month running, and to the greatest extent since August last year," she added.-TradeArabia News Service