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Saudi: January business conditions see strongest improvement in 13 months

Emirates NBD has released its January data from their Purchasing Managers’ Index® (PMI®) for Saudi Arabia.

"The output index was slightly higher in January than in Q4 2018, but is still below the historical average of 63.0" - Emirates NBD "Business optimism about future output was the highest in more than five years in January 2019" “The PMI survey showed only a modest rise in private sector jobs and wages last month"

February sees the release of January data from the Emirates NBD Purchasing Managers’ Index® (PMI®) for Saudi Arabia. The survey, sponsored by Emirates NBD and produced by IHS Markit, contains original data collected from a monthly survey of business conditions in the Saudi Arabian private sector.

Commenting on the Saudi Arabia PMI® survey, Khatija Haque, Head of MENA Research at Emirates NBD, said:

“The headline Emirates NBD PMI for Saudi Arabia rose to its highest level in more than a year in January.  The main driver was an acceleration in new order growth, which appears to have been domestically driven, as export orders remained broadly flat month-on-month. Some of the growth in new orders was likely due to price discounting: output prices fell by the most since February 2018.  Firms were able to reduce selling prices as their purchasing costs also declined in January.  

“Output increased at a similar rate to December.  The output index was slightly higher in January than in Q4 2018, but is still below the historical average of 63.0, suggesting that growth in output is still weaker than in previous years.  Firms increased their quantity of purchases in January, probably reflecting stronger order growth, and stocks of pre-production inventory also rose the most since September 2018.

“The PMI survey showed only a modest rise in private sector jobs and wages last month, with 2.5% of firms surveyed reporting increased hiring and 2% reporting wage increases.     

“Business optimism about future output was the highest in more than five years in January 2019.  The government has announced an ambitious budget for this year, with expenditure projected to rise more than 7%, as well as a number of initiatives to boost investment and expansion in the non-oil sectors of the economy, which likely contributed to positive business sentiment.  The recovery in oil prices last month after a sharp sell-off in December 2018 likely also helped.”

The summary of findings of the January survey were as follows:

-Headline PMI climbs to 56.2…

-…supported by faster increases in output, new orders and employment

-Output prices fall again amid the steepest drop in costs in survey history

The headline seasonally adjusted 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 – climbed to 56.2 in January, from 54.5 in December, its highest reading for 13 months. The rise in the index reflected not only stronger growth in output, new orders and employment, but also a recovery in the rate of expansion in stocks of purchases. The only negative influence on the index came from the supplier delivery times component, which showed lead-times improving at a quicker rate (generally a sign of less pressure on supply chains).   



The seasonally adjusted Output Index ticked up in January, to signal a marked and slightly accelerated increase in the level of business activity across Saudi Arabia’s non-oil private sector. Around 18% of surveyed companies reported a rise in output, which they often linked to improved underlying demand and an associated increase in new orders.  

New Orders

The start of the year saw a strong increase in demand for goods and services across Saudi Arabia’s non-oil private sector. The rate of growth in new business was the quickest observed since December 2017, with almost three times as many firms recording an increase in new work (45%) as those that registered a decline (16%). Increased marketing and competitive pricing were two factors that helped to support demand, according to panellists.

Export Orders

The level of new business received from abroad in January was virtually unchanged from the month before. This was highlighted by the respective seasonally adjusted index registering a reading that was broadly in line with the 50.0 no-change mark. This followed modest growth of new export orders throughout the final quarter of 2018. 

Backlogs of Work

Latest data indicated a moderate rise in the level of outstanding business across Saudi Arabia’s non-oil private sector in January. It marked the eighth-month running in which an increase has been recorded. Where backlogs of work accumulated were during the month (at almost 14% of companies), this was often linked to a demand-driven rise in workloads. 

Suppliers’ Delivery Times

As has been the case in every month since August 2011, January data indicated a decrease in average lead-times on purchased items (both raw materials and goods for resale). Although the improvement in supplier performance was slightly greater than that seen in December, the respective seasonally adjusted index remained well below its long-run average of 54.9 (since 2009).


There was positive news on the labour market front in January. Encouraged by rising inflows of new work, firms across the private sector took on additional staff to extend the current sequence of job creation to 58 months. The rate of employment growth picked up from December’s 20-month low, though was still only modest overall. 

Output Prices

Competitive pricing strategies among Saudi Arabia’s non-oil private sector firms remained a key feature of the latest survey data. A decrease in average output prices was recorded for the sixth time in the past seven months, with the rate of decline accelerating to the quickest seen since February last year. 

Overall Input Prices


Businesses were given greater scope to reduce charges in January thanks to a drop in their operating expenses during the month. Though the extent to which overall input prices decreased was only modest, it represented the most marked decline since data collection began almost ten years ago. The reduction in total cost burdens was underpinned a fall in average prices paid for purchases. 

Purchasing Prices

The seasonally adjusted Purchase Prices Index dipped below the 50.0 ‘no-change’ threshold for only the third time in the survey history in January. The latest reading indicated a moderate rate of decline that was the quickest on record. Reports from panellists suggest that some suppliers had offered discounts in order to grow their sales. 

Staff Cost

The main source of cost pressure during January came from rising staff pay, which increased on average for the third month in a row. That said, the rate of salary/wage growth remained below the average over the series history, with the vast majority (98%) of surveyed businesses reporting no change from the month before. 

Quantity of Purchases

Stronger new order growth at the start of the year led businesses to scale up their purchasing activity, to not only support higher workloads but also expand safety stocks. However, despite the rate of growth in buying levels picking up since December, when it had reached a series-record low, it was still subdued by historic standards.

Stocks of Purchases

Helped by the recovery in buying levels during the month, stocks of purchases across Saudi Arabia’s non-oil private sector rose in January at the quickest rate since last September. It marked the first acceleration in inventory growth for six months and meant that the respective seasonally adjusted index was fractionally above its average in 2018.

Future Output

Expectations among Saudi Arabia’s non-oil private sector businesses towards future output remained strongly positive in January. The degree of optimism improved for the second month in a row to reach the highest in over five years. Those companies that believed their business activity would rise over the next 12 months commented on plans for new and improved products, further discounts and positive forecasts for underlying demand.