Saudi private non-oil sector index surges to six-month high

08/07/2014 08:30 AST

JEDDAH – Saudi Arabian non-oil producing private sector companies continued expansion in June, the Saudi British Bank said in its headline SABB/HSBC Saudi Arabia Purchasing Managers’ Index (PMI) for June 2014.

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

June data signaled the continued expansion of the Saudi Arabian non-oil private sector, with the seasonally adjusted headline PMI recording 59.2, up from 57.0 in May. This highlights a strong improvement in operating conditions and the highest since January.

The improvement in the SABB/PMI Index partly emanated from stronger growth in both output and new orders, while record-high buying activity was recorded. The pace of output growth quickened to a 26-month high. New business from abroad also improved, albeit at a slower pace than total new orders.

Companies sought to meet rising demand by ramping up output. Firms also recorded a further increase in backlogs of work as new business rose sharply. However, the rate of accumulation was slower than in the previous month and was moderate overall.

In response to growing signs of capacity constraints at their units, Saudi Arabian non-oil private sector firms increased their workforce numbers for a third successive month. The net rise in employment was solid overall, with the latest increase the fastest in the current sequence of job creation.

Survey participants signaled strong levels of optimism for growth by continuing to increase their purchasing activity during June. The latest data indicated the sharpest rise in input buying since the survey began in August 2009, as companies expanded their inventories in order to meet current levels of demand and in anticipation of higher future workloads. Consequently, stocks of purchases continued to build in June and the rate of increase was the sharpest in four months.

In spite of strong demand for inputs, average delivery times continued to improve. Better vendor performance was encouraged by a competitive market that required shorter delivery times.

The SABB/HSBC PMI Index showed that overall input costs in Saudi Arabia’s non-oil private sector continued to rise in June. Staff cost increases were marginal, with purchase prices the driving force behind the rise in overall input costs. Survey Participants linked higher purchasing costs to a strong level of demand present in the economy.

In response to increased cost increases, companies raised their selling prices, albeit marginally, during June. The pace of expansion was fractional overall, with the vast majority of the panel reporting no change from the previous month.

Saudi Gazette