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Emirates NBD: Saudi New order growth sharpest since April

According to an Emirates NBD Saudi Arabia PMI® survey, produced by IHS Markit, the health of the Saudi non-oil private sector continued to improve during August. Growth was supported by sharp expansions in new orders and output. Moreover, international demand for Saudi Arabian products and services picked up, as highlighted by a renewed increase in new export orders.

Channelling cost

Growth of staffing levels was sustained during August, as companies responded to greater capacity pressures by taking on extra staff. Companies continued to face upward cost pressures, but their ability to fully pass on higher cost burdens to consumers was restricted by intensive competitive conditions. The rate of growth in inventories climbed to a record high, reflecting greater buying levels.

Khatija Haque, Head of MENA Research at Emirates NBD, said: “Saudi Arabia’s non-oil sectors expanded at a solid rate in August, with the headline PMI broadly unchanged from July. The recovery in export orders helped boost overall new order growth to the fastest rate in four months in August, while output also showed a sharp rise last month.”

Key findings

The headline seasonally adjusted PMI® edged up to 55.8 in August, from 55.7 in July. However, the headline PMI remained below its long-run average (58.1).

The upward movement in the headline index was supported by a sharper increase in new orders. The rate of growth in new work quickened to the fastest in four months, due to more projects and stronger underlying demand.

Companies observed a renewed expansion in new export orders during August due to stronger international demand for Saudi Arabia’s products and services.

Firms faced capacity pressures for the tenth successive month and raised payroll numbers accordingly. The rate of job creation slowed to the weakest since April, however.

Companies purchased greater quantities of inputs during August. As a result, inventories were accumulated at the sharpest rate in the survey history.

Although the level of positive sentiment dipped to the lowest since October 2016, firms retained positive expectations over the 12-month outlook for output. Optimism was rooted in forecasts of further improvements in market demand.