New orders boost Saudi non-oil business growth

Riyadh / Emirates Business

The health of the non-oil private sector in Saudi Arabia continued to improve during August. Growth was supported by sharp expansions in new orders and output. Moreover, international demand for Saudi Arabian products and services picked up, as highlighted by a renewed increase in new export orders. Growth of staffing levels was sustained during August, as companies responded to greater capacity pressures by taking on extra staff.
Companies continued to face upward cost pressures, but their ability to fully pass on higher cost burdens to
consumers was restricted by intensive competitive conditions. The rate of growth in
inventories climbed to a record high, reflecting greater buying levels.
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 Saudi Arabia PMI® survey, Khatija Haque, Head of MENA Research at Emirates NBD, said: “Saudi Arabia’s non-oil sectors expanded at a solid rate in August, with the headline PMI broadly unchanged from July.
“The recovery in export orders helped boost overall new order growth to the fastest rate in four months in August, while output also showed a sharp rise last month.”
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 – edged up to 55.8 in August from 55.7 in July. This was consistent with the strongest improvement in operating conditions since April. However, the headline PMI remained below its long-run average (58.1).
The upward movement in the headline index was supported by a sharper increase in new orders.
The rate of growth in new work quickened to the fastest in four months. More projects and stronger underlying demand were cited by panellists as the key factors behind greater inflows of new business. Despite softening from the preceding month, output grew sharply. Panellists
attributed the rise in busi- ness activity to favourable
economic conditions.
Companies observed a renewed expansion in new export orders during August. Growth was recorded for the second time in the past five months. Opportunities arising from new export markets were frequently linked by panellists to stronger international demand for Saudi Arabia’s products and services.
Firms faced capacity pressures for the tenth successive month and raised payroll numbers accordingly.
The rate of job creation slowed to the weakest since April, however. Companies purchased greater quantities of inputs during August. As a result, inventories were accumulated at the sharpest rate in the survey history.
Firms faced higher cost burdens during August, with both purchasing prices and staff salaries rising further. Consequently, firms passed on higher input costs to consumers. However, the pace of output price inflation was
only marginal.
Although the level of
positive sentiment dipped to the lowest since October 2016, firms retained positive expectations over the 12-month outlook for output. Optimism was rooted in forecasts of further improvements in market demand.

Egypt non-oil business contraction slows slightly
CAIRO / Reuters

Egypt’s non-oil private sector business activity shrank in August at the slowest pace since July last year amid a decline in new orders and a jump in exports, a survey showed on Wednesday. The Emirates NBD Egypt Purchasing Managers’ Index (PMI) for the non-oil private sector rose to 48.9 in August from 48.6 a month before but remained below the 50 mark that separates growth from contraction.
Output continued to decline in August, but improved from the previous month, with the related subindex standing at 48.8, compared with 47 in July, the survey showed. New orders declined in August, reaching 49.5 from 50 the previous month, when it briefly ended a 21-month trend of decline. For the fifth month in a row, new exports rose, with the subindex climbing to 53.7 from 50.3 in July, as the Egyptian pound remained weak. Egyptian exports have gained new markets since the central bank liberalized the exchange rate in November as part of a $12 billion International Monetary Fund reform programme. The pound has lost half its value since the float.
The economy has been struggling to recover since a 2011 uprising scared tourists and investors away, two main sources of foreign currency, but the three-year IMF programme is expected to help restore confidence in the North African country.
“Egypt’s PMI improved further in August, although it remains in contraction territory at 48.9. New orders declined only marginally after stabilizing in July, and new export orders increased at the fastest rate since May,” said Khatija Hague, head of MENA Research at Emirates NBD.