Saudi nonoil business rises to 4-month high

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JEDDAH — Growth in Saudi Arabia's nonoil private sector accelerated to a four-month high in February, a monthly report from Saudi British Bank (SABB) and HSBC said.

The SABB HSBC Saudi Arabia Purchasing Managers' Index (PMI) climbed to a four-month high of 58.5 in February, up from 57.8 in January.

It reflects the economic performance of Saudi Arabian nonoil producing private sector companies through monitoring a number of variables, including output, orders, prices, stocks and employment.

The latest reading highlighted a robust improvement in nonoil private sector operating conditions, reflected by steep expansion in output, new orders and employment.

Underpinning the strong performance of Saudi Arabia's nonoil private economy was marked growth of new business in February.

Moreover, the increase in total new work was supported by a robust expansion in foreign orders during the month.

Similarly, output rose in line with the headline index in February, amid reports of improving demand.

The rate of expansion accelerated to the most marked since last October, having eased to the joint-weakest in ten months at the start of 2015.

Subsequently, firms operating in Saudi Arabia's nonoil private sector continued to hire additional staff in February, extending the current sequence of jobs growth to 11 months.

Furthermore, the pace of job creation picked up from the prior month and was above the long-run series average. That said, according to the latest survey, stronger order books continued to place pressure on operating capacity in February, with backlogs of work rising for the twenty-fifth month running.

Higher new work inflows and business requirements also impacted on purchasing activity during the month.

Companies raised their input buying at a sharp rate, leading to a solid increase in pre-production inventories.

Meanwhile, average lead times shortened at the fastest rate since December 2012 in February.

A number of panel members commented on a positive reaction from suppliers to increased demand for inputs.

Inflationary pressures from input costs eased and were historically muted in February.

The rate of purchase price inflation slowed for the fourth month in succession, while average staff costs continued to increase at a modest pace. As a result, overall input prices rose at the weakest pace in nine months.

Higher costs were linked by panelists to strong demand conditions, although there were also reports of lower oil prices during the month.

Likewise, prices charged by Saudi Arabia's nonoil private sector firms rose only marginally in February.

Competitive pressures partially offset the impact of higher input costs.

This article was first published in the Saudi Gazette on March 8, 2015.