Market Insights: Strong start to the final quarter of 2017 for Saudi Arabia’s non-oil private sector, according to Emirates NBD
October data signalled a strong start to the final quarter of 2017 for Saudi Arabia’s non-oil private sector. Sharp growth of both output and new orders contributed to latest improvement in operating conditions. On the price front, an uptick in cost pressures was recorded, which according to anecdotal evidence led to higher selling prices. Business confidence improved during October, prompting firms to increase stocks of purchases at a record rate in anticipation of further improvements in economic conditions.
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:
“The headline PMI index for Saudi Arabia has been broadly stable for the last four months, at a level which suggests solid growth in the non-oil sector. Encouragingly, firms were much more optimistic in October than they were in September, which bodes well for growth in the final quarter of this year.”
- Headline PMI ticks up to 55.6, from 55.5
- Steep increases in both output and new orders
- Pre-production stocks built-up at record pace
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 – rose to 55.6 in October, up from 55.5 in September. This indicated a steep expansion in Saudi Arabia’s non-oil private sector. That said, the pace of growth remained below the long-run series average.
Incoming new business grew at a steep rate during October. Panel member reports suggested that strong domestic demand contributed to the latest improvement in order books. New export orders grew for the third month running, albeit at a fractional pace overall.
The upturn in demand for Saudi-produced goods and services led to sharp growth in output, according to anecdotal evidence. That said, the rate of expansion eased since the preceding survey period.
Non-oil private sector companies in Saudi Arabia continued to employ additional staff during October. The latest increase extended the current sequence of job creation to 43 months. That said, the rate of growth was slight overall and below the series’ historical average.
Optimism towards future growth prospects reached a five-month high in October. Better marketing campaigns, business investments and an expected improvements in economic conditions underpinned the latest rise in confidence. Furthermore, companies in Saudi Arabia’s non-oil private sector built-up stocks of purchases at the fastest pace in the survey history. Many linked the increase to forecasts of stronger demand.
October data indicated a marginal uptick in average cost burdens, linked to a rise in raw material costs. That said, the rate of input price inflation remained below the long-run series average. Meanwhile, staff cost inflation eased and was muted in the context of historical data.
Companies in Saudi Arabia’s non-oil private sector passed on to their clients part of the additional cost burden during October by raising selling prices. The return to output price inflation followed discounts registered in September.