SAUDI ARABIA. Saudi Arabia’s non-oil private sector began the third quarter of 2015 on a positive note, with business conditions improving at the fastest pace in three months during July.
Stronger growth of the sector as a whole was mainly driven by sharper expansions in both output and new orders, while purchasing activity also rose more quickly.
However, data for employment bucked the general trend, as the rate of hiring eased to a 14-month low. On the price front, cost pressures intensified, leading to modest charge inflation.
The survey, sponsored by Emirates NBD and produced by 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.
“The latest PMI survey is encouraging, and suggests that the slight slowdown we’ve been seeing in the region’s largest economy since March is now over. Despite global oil prices remaining low, the pace of expansion in Saudi Arabia’s non-oil economy still appears robust, and coupled with rising oil output, will prove supportive to headline GDP growth in H2.”
Key Findings
PMI climbs to three-month high, having slipped to survey-record low in June
Output and new orders both rise at marked rates…
…but jobs growth eases to weakest in 14 months
After adjusting for seasonality, 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 57.7 in July, up from a survey-record low of 56.1 in June.
The latest figure was the highest in three months, and consistent with a robust improvement in business conditions. It was also broadly in line with the average recorded so far this year (57.9).
Underpinning the overall expansion was faster growth of both output and new orders in July. Activity rose at the quickest rate since March, while data also highlighted a sharp rise in new work. There were reports that higher sales volumes and new marketing initiatives had helped to strengthen demand conditions, which in turn provided a boost to output growth.
According to survey data, the latest increase in total new business was supported by another marked rise in new export orders. Growth quickened to a four-month high, having eased to the weakest in a year during June.
Purchasing activity rose in line with new orders and business requirements in July. The rate of expansion was strong compared with the series average and marked overall. As a result, input stocks continued to rise, albeit more slowly than in the previous month.
Sharper growth of output and new work had little impact on payroll numbers, however, as the respective index for employment slipped to a 14-month low. The reading pointed to only a modest rate of job creation in July.
Meanwhile, total input costs faced by Saudi Arabia’s non-oil private sector firms rose further in July, continuing the trend observed throughout the survey’s six-year history. The rate of inflation accelerated to the quickest since last September, helped by increases in both purchase prices and staff costs during the month. That said, it remained muted in the context of historical data.
Subsequently, charges increased for the third straight month in July. Although modest overall, the latest rise was the fastest since November 2014. Those companies that raised selling prices commented on higher input costs.
The next Saudi Arabia PMI Report will be published on September 3rd 2015 at 08:30 (RIYADH)
About The Emirates NBD Saudi Arabia Purchasing Managers’ Index
The Emirates NBD Saudi Arabia Purchasing Managers’ Index is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 private sector companies, which have been carefully selected to accurately represent the true structure of the Saudi non-oil economy, including manufacturing, services, construction and retail. The panel is stratified by Standard Industrial Classification (SIC) group, based on industry contribution to GDP.
Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month. For each of the indicators the ‘Report’ shows the percentage reporting each response, the net difference between the number of higher/better responses and lower/worse responses, and the ‘diffusion’ index. This index is the sum of the positive responses plus a half of those responding ‘the same’.
The Purchasing Managers’ Index™ (PMI™) is a composite index based on five of the individual indexes with the following weights: New Orders – 0.3, Output – 0.25, Employment – 0.2, Suppliers’ Delivery Times – 0.15, Stock of Items Purchased – 0.1, with the Delivery Times index inverted so that it moves in a comparable direction.
Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change. An index reading above 50 indicates an overall increase in that variable, below 50 an overall decrease.
Markit do not revise underlying survey data after first publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series.
Photo Caption: Jean-Paul Pigat, Senior Economist at Emirates NBD
About Emirates NBD
Emirates NBD is a leading banking Group in the region. As at 31st March 2015, total assets were AED 367.5 billion, (equivalent to USD 100). The Group has a leading retail banking franchise in the UAE, with more than 215 branches and over 889 ATMs and CDMs in the UAE and overseas. It is a major player in the UAE corporate and retail banking arena and has strong Islamic banking, Global Markets & Treasury, Investment Banking, Private Banking, Asset Management and Brokerage operations.
The Group has operations in the UAE, Egypt, the Kingdom of Saudi Arabia, Qatar, Singapore, the United Kingdom and representative offices in India, China and Indonesia.
The Group is an active participant and supporter of the UAE’s main development initiatives and of the various educational, environmental, cultural, charity and community welfare establishments.
About Markit
Markit is a leading global diversified provider of financial information services. We provide products that enhance transparency, reduce risk and improve operational efficiency. Our customers include banks, hedge funds, asset managers, central banks, regulators, auditors, fund administrators and insurance companies. Founded in 2003, we employ approximately 4,000 people in 11 countries. Markit shares are listed on Nasdaq under the symbol MRKT.
For more information, please see www.markit.com.
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