Non-oil private sector in Saudi Arabia surges to over 3-year high

Saudi Arabia’s non-oil producing private sector economy continued improvement, with SABB/HSBC Saudi Arabia Purchasing Managers’ Index (PMI) for September 2014 posting 61.8, up from August’s 60.7 and the best reading since June 2011. The PMI has now risen for four successive months.

In the latest Saudi British Bank PMI report, it noted that the growth was underpinned by accelerated increase in new work and output. Latest data showed that new business rose at its strongest pace for 28 months, amid strong demand for goods and services. Notably, construction was reported by several sources to be a key area of demand growth, while others reported the benefits of higher marketing and promotional activities.

New export business also continued to strengthen over the month, with growth little changed on August’s five-month high. Strong reputations for quality goods and services provision, plus better demand conditions abroad, were widely reported to have driven new export business up.

As total new business continued to rise, companies responded by increasing activity at their units. September’s study indicated the fastest growth in output since March 2011. Companies reported working on a range of new projects as well as dealing with incoming new business.

Capacity was stretched as a result, with the latest data indicating the sharpest increase in backlogs of work since the study began.

Amid pressure on existing capacity, additional workers were recruited by Saudi Arabia’s nonoil private sector companies during September. The run of consecutive monthly growth now stretches to six months, with the latest increase in staffing levels the best seen in nearly two years.

On the price front, input costs continued to increase during September, albeit at the slowest pace in three months. Purchasing prices were the main driver of overall cost increases as suppliers raised their charges in response to firmer demand.

Furthermore, the study showed confidence among the participants that recent positive trends in activity and new business would be sustained by raising their purchasing activity to the greatest degree in over five years of data collection. Part of the increase in buying went directly into stock, with inventories of purchases rising at a marked pace over the month.

This article was first published in the Saudi Gazette on Monday, Oct. 20, 2014.