MARKET INSIGHTS – Saudi Arabia’s private sector growth remains strong according to Emirates NBD Saudi Arabia PMI®
September data signalled strong growth in Saudi Arabia’s non-oil private sector. Sharp expansions in output and new orders were key contributors towards the most recent improvement in operating conditions. At the same time, input price inflation continued to soften in the latest survey. Moreover, firms generally reduced their output charges to increase competitiveness. Meanwhile, employment continued to increase, albeit only marginally.
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 PMI for Saudi Arabia has been relatively stable in Q3, signalling a solid expansion in non-oil sector growth last quarter. While output and new order growth has remained strong, external demand was softer compared to a year ago, as was employment growth. The announcement of key reforms and a successful USD 12bn debt issue in late September should have a positive impact on both sentiment and business activity in the coming weeks.”
- Headline PMI edges down to 55.5
- Sharp increases in both output and new orders
- Vendor performance improves to greatest extent since January 2010
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 down from 55.8 in August to 55.5 in September. Although the reading continued to signal a sharp improvement in the health of the sector, the headline PMI continued to score below the long-run average.
September data signalled sustained growth in output across Saudi Arabia’s non-oil private sector. Though sharp, the rate of expansion remained slower than the historical average, however. Panellists that reported a rise in output commonly noted strong underlying demand.
Growth in new orders softened slightly during September, but remained steep overall. In line with the trend for overall new business, new export order growth eased in the latest survey. Notably, the rate of expansion was only slight, having eased from the solid pace recorded in the preceding survey.
Employment growth across Saudi Arabia’s non-oil private sector remained slight overall and matched that recorded in August. The increase extended the current sequence of job creation to 42 months. Companies that noted an increase in payroll numbers linked this to rising output requirements.
Output prices fell for the first time since May at the end of the third quarter. That said, the rate of reduction was marginal overall. Anecdotal evidence suggested that firms reduced selling prices in order to remain competitive. Meanwhile, the rate of input price inflation eased to the lowest for three months in September.
Vendor performance improved to the greatest extent since January 2010 in September. Delivery times have hastened in every month since August 2011.
Finally, business confidence ticked up in the latest survey. Many firms noted that they anticipate an economic upturn in the next 12 months. However, the overall level of positive sentiment remained well below the long-run average.