Saudi British Bank publishes results of SABB HSBC Saudi Arabia Purchasing Managers' Index PMI for August 2012

At 58.3 in August, up fractionally from 58.1 in July, the seasonally adjusted PMI index pointed to another robust improvement in business conditions facing non-oil private sector companies operating in Saudi Arabia.

Behind the slight uptick in the headline number was a more marked increase in incoming new business, which anecdotal evidence attributed to a range of factors including greater sales and marketing efforts and improving market conditions.

In addition, a number of firms also linked higher intakes of new work to increased construction activity. New work from foreign clients also increased during August, though the rate of growth was at a 21-month low.

Output levels at Saudi Arabia non-oil private sector businesses increased markedly in August. Unlike the trend in new orders, however, growth of activity was the weakest since last October. Job creation also eased slightly, with overall employment levels rising at the slowest pace for five months.

Backlogs of work at KSA non-oil private sector companies accumulated for the tenth time in the past 11 months in August, after falling marginally during the previous survey period. The increase was solid compared to the historical series trend and generally associated by respondents with greater intakes of new business.

With workloads increasing on the month, purchasing activity among KSA non-oil private sector companies continued to rise. The pace of expansion was broadly unchanged from that registered in July, and sufficient for a further (albeit weaker) increase in stocks of purchases. Many firms that built pre-production inventories noted expectations for growth in activity over the coming months.

Despite input buying increasing, suppliers' delivery times shortened again during August. Competition among vendors and faster payments were reportedly behind the improvement in performance, which was of a similar magnitude to that registered one month previously.

August data showed that prices charged by businesses operating in Saudi Arabia's non-oil private sector economy decreased for the first time in over three years of data collection.

Although only slight, the reduction in selling prices contrasted with a further rise in average costs. Overall input price inflation was slightly stronger than July's seven-month low, and underpinned by growth of both purchasing and staff costs. The former rose relatively quicker over the month, with the costs of a range of raw materials pushed higher by stronger demand.