14/08/2018 08:02 AST

Saudi non-oil private sector growth fractionally slower in July, the June data from the Emirates NBD Purchasing Managers’ Index (PMI) for Saudi Arabia released Monday showed.

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 Arabian private sector.

Commenting on the Saudi Arabia PMI survey, Khatija Haque, Head of MENA Research at Emirates NBD, said: “The headline Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) eased marginally to 54.9 in July from 55.0 in June. Although the index has rebounded over the last couple of months, year-to-date the headline PMI averaged 53.4, well below the 56.0 average for the same period last year, which indicates a much slower rate of growth in the Kingdom’s non-oil private sector so far this year.

The PMI survey showed both output and new orders increased sharply last month, although at a slightly slower rate than in June. However, once again the year-to-date average for both series indicate much softer growth than for the same period in 2017. Employment increased modestly in July, as did new export orders. There is very little evidence of wage growth in Saudi Arabia’s private sector, with the staff costs index at 50.3 in July, similar to the prior two months.

While input costs continued to rise in July, the rate of increase was slower than in July. The vast majority of firms kept selling prices unchanged last month, although the output price index was fractionally below the neutral 50.0 level. The backlogs of work increased sharply in July, with some firms attributing this to delays in ongoing projects. Firms saw inventories rise at the fastest rate this year in July, which may indicate some optimism about improving demand in the near term. More than 18% of respondents expected their output to be higher in 12 months’ time, down from more than 40% earlier in the year. Given the sharp rise in actual output and new orders in June and July, it is reasonable for expectations to be more modest going forward.”

The main findings of the July survey were as follows:

• Headline PMI eases fractionally to 54.9 in July, from 55.0 in June

• Output and new order growth remains marked

Backlogs of work rise at sharp pace

• At 54.9 in July, down from 55.0 in June, 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 – remained in positive territory and thus indicated a solid improvement in business conditions. The figure remained broadly in line with the two-year trend, and above the average seen since the VAT introduction at the beginning of the year.

Non-oil private sector firms in Saudi Arabia continued to report marked growth of output in the latest survey period, although the rate of expansion cooled fractionally since June. Survey respondents linked higher activity to solid inflows of new business.

Despite marked growth of output, businesses reported the third-sharpest build-up in backlogs of work in the survey’s history in July. Some firms noted delays in ongoing projects, leading to an increase in work outstanding.

Total new order growth remained marked in July. The expansion extended the current phase of growth to three months. Furthermore, foreign demand continued to improve. Some firms noted an increase in orders from neighboring GCC countries.

Despite a continuation of robust business conditions and rising backlogs of work, job creation in the non-oil private sector remained historically subdued. July’s increase in employment was only slight overall, matching that registered in June.

The latest data indicated a softer increase in average cost burdens in July. Reflecting easing input price pressures, some firms sought to increase client demand by offering price discounts. That said, output charges only fell fractionally overall.

Business confidence in the non-oil private sector remained subdued in the context of 2018 so far during July. Nonetheless, the degree of optimism remained strong overall and improved since June. Marketing initiatives, new product launches and an expected economic upturn underpinned positive sentiment in the latest survey.

Saudi Gazette

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