05/01/2017 07:14 AST
Following October’s record low, growth of the Saudi Arabian non-oil private sector strengthened again in December. Output rose at the sharpest rate since August, while new orders increased at a marked, albeit slightly slower, rate.
Companies responded to increased requirements by raising their purchasing activity and boosting inventories amid positive growth projections.
However, with the rate of expansion in new work remaining below its long-run trend, staffing levels continued to be increased only slightly.
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: “Improving demand was a key driver for output and new order growth in Saudi Arabia in December, which is very encouraging as we look forward to 2017. While firms increased purchases and accumulated inventory in anticipation of future orders, they were reluctant to boost hiring. Overall, the pace of non-oil private sector growth this year, as indicated by the PMI survey, was markedly lower than 2015.”
Key findings:
• PMI rose on sharper gain in output amid evidence of robust market demand
• Employment growth remained marginal despite rising backlogs of work
• Input costs and output charges continued to increase
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 – improved to a level of 55.5 during December, up from November’s 55.0 and the best reading since August. December’s PMI was indicative of a further marked improvement in overall operating conditions.
Underpinning overall growth was an acceleration in the rate of expansion of output to a four-month high. Latest data marked the second month in a row that production growth has risen following the record low pace of expansion seen in October.
Panelists widely commented that the latest increase in production was the result of ongoing strength in new order books plus further investment in sales and marketing activities. Volumes of new business continued to rise sharply in December amid reports of better market demand. A number of panelists commented on increased activities in the construction sector. Foreign demand also continued to strengthen, with new export orders rising to the greatest degree for four months.
With production and order book requirements rising, there was a similarly marked increase in purchasing activity during December. Panelists also sought to replenish stocks of inputs in line with positive expectations for demand and new orders.
Despite evidence of modest pressure on capacity (backlogs of work rose for a second month in a row), staffing levels in the Saudi Arabian non-oil private sector increased only marginally and at the slowest pace in a year during December. Just 2% of the survey panel reported an increase in staffing levels over the month.
On the price front, operating costs continued to increase in December, albeit at a relatively modest pace that was slower than November’s three-month high. Inflation was again underpinned by higher purchase prices as wage levels increased at only a fractional rate.
A desire to pass on these higher costs to clients, plus reports of strengthened market demand, meant several companies raised their own prices in December. However, the rate of inflation was only marginal, despite being the greatest since August.
Saudi Gazette
Please wait...
