Saudi non-oil private sector growth picks up pace

Emirates Business

The expansion of Saudi Arabia’s non-oil private sector picked up speed in July, as highlighted by the strongest improvement in business conditions since last November. Output growth was particularly sharp, while new orders also increased at a faster pace. The improvement in demand was broad-based across domestic and international markets – exports rose for the first time in four months. Job creation and higher input stocks were among the other factors supporting overall growth. Meanwhile, the absence of strong cost pressures meant that output prices were broadly stable, having risen marginally one month previously.
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, Jean-Paul Pigat, Senior Economist at Emirates NBD, said. “July’s survey is encouraging as it suggests Saudi Arabia’s non-oil economy continues to expand at a healthy clip. Growth momentum is slower than last year, but is holding up better than many had expected in an environment of low oil prices.”
Rising from 54.4 in June to 56.0, the headline 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 – posted the highest reading in eight months during July. That signalled a notable acceleration in growth, particularly in the context of the trend over the past year (55.3). That said, the rate of improvement in business conditions remained below the long-run series average (58.5).
Underpinning growth of the non-oil private sector as a whole was a sharp rise in output at the start of the third quarter. The rate of expansion was the quickest since September 2015. Panellists attributed higher activity to incoming new work resulting from marketing initiatives.
Reports of improving demand were supported by survey data, which showed new business rising to the greatest extent in eight months during July. Firms suggested that promotional efforts and high quality goods and services had contributed to stronger demand. Moreover, growth of total new work was supported by an increase in exports for the first time in four months. That marked a resumption of the trend seen throughout the survey’s history up until April.
Solid growth of output and new business convinced companies to hire additional staff in July.
The rate of job creation was the fastest since last October, albeit moderate overall.