Saudi’s non-oil private sector improves, jobs growth remains slow

Saudi Arabia’s non-oil private sector posted improved growth at the start of 2017 led by sharp increases in output and new business, according to the latest monthly survey by Emirates NBD.

The seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) rose from 55.5 in December to 56.7 in January – the strongest rate of improvement seen in nearly one and a half years.

Improved growth in output – the strongest rate in 17 months – was a “key factor” for the increase in the index. Anecdotal evidence linked the latest increase to improved market demand, the report said.

Volumes of incoming new business also rose at the sharpest pace in 14 months.

Survey respondents attributed increased sales to promotional activities in January. Another factor was a marked expansion in new export work, which reportedly occurred as firms offered internationally competitive prices.

Companies also raised their inputs in order to cater to increased output requirements. “Though weaker than the series average, the rate of expansion was sharp overall, and underpinned the fastest rate of inventory accumulation in 16 months,” the report said.

But despite an increase in work backlog, firms only “marginally” increased their workforce numbers during January. Higher staff numbers were generally linked to new project start-ups, the report stated.

Also read: Job cuts expected to continue in Saudi this year – survey

On the price front, charges rose for the third successive month amid a further increase in input costs.

Some firms passed on higher cost burdens to clients in the form of greater selling prices. However, the rate of output charge inflation was slight as firms faced intense market competition, the report stated.

Looking ahead, the degree of positive sentiment improved to a five-month high. Companies expect market conditions to continue to improve and boost output over the coming 12 months, the survey found.

Khatija Haque, head of MENA Research at Emirates NBD, said: “The rise in Saudi Arabia’s PMI to the highest level in 17 months is an encouraging start to the year, particularly as it reflects faster output and new order growth in January. Firms also appear to be more optimistic about the coming 12 months.”