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Saudi private sector growth rebounds after hitting record low in Oct

Saudi Arabia’s non-oil private sector strengthened again in December after touching record lows in October, according to a new business survey.

Data from the Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) showed that output rose at the sharpest rate since August, while new orders increased at a marked, albeit slightly slower, rate.

Companies responded to increased requirements by raising their purchasing activity and boosting inventories amid positive growth projections, the survey said.

However, with the rate of expansion in new work remaining below its long-run trend, staffing levels continued to be increased only slightly, it added.

The headline seasonally adjusted Emirates NBD Saudi Arabia PMI improved to a level of 55.5 during December, up from November’s 55.0 and the best reading since August.

Khatija Haque, head of MENA Research at Emirates NBD, said: “Improving demand was a key driver for output and new order growth in Saudi Arabia in December, which is very encouraging as we look forward to 2017. While firms increased purchases and accumulated inventory in anticipation of future orders, they were reluctant to boost hiring.  Overall, the pace of non-oil private sector growth this year, as indicated by the PMI survey, was markedly lower than 2015.”

The survey said that underpinning overall growth was an acceleration in the rate of expansion of output to a four-month high. Latest data marked the second month in a row that production growth has risen following the record low pace of expansion seen in October.

Panellists widely commented that the latest increase in production was the result of ongoing strength in new order books plus further investment in sales and marketing activities.

Volumes of new business continued to rise sharply in December amid reports of better market demand. A number of panellists commented on increased activities in the construction sector. Foreign demand also continued to strengthen, with new export orders rising to the greatest degree for four months.

Despite evidence of modest pressure on capacity, staffing levels in the Saudi non-oil private sector increased only marginally and at the slowest pace in a year during December. Just 2 percent of the survey panel reported an increase in staffing levels over the month.

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