Non-oil private sector expansion gathers momentum in August
Riyadh, September 3rd, 2015: Saudi Arabia's non-oil private sector continued on its strong growth path in August, with business conditions improving at the sharpest pace since March. Output, new orders and employment all rose more quickly, as did purchasing activity. As a result, the sector gathered further momentum, having expanded at the weakest rate in the survey's history at the end of the second quarter. Meanwhile, competitive pressures and a relatively muted rise in input costs led to a marginal reduction in output charges.
The survey, sponsored by Emirates NBD and produced by Markit, contains original data collected from a monthly survey of business conditions in the Saudi private sector.
Commenting on the Emirates NBD Saudi Arabia PMITM, Khatija Haque, Head of MENA Research at Emirates NBD, said.
"Activity in the non-oil sector does not appear to have been affected by the decline in oil prices since June. However, we note that increased oil production in the Kingdom has likely boosted activity in the related manufacturing sectors, which would be included in the PMI survey. Bloomberg estimates that oil production in Saudi Arabia is more than 5% higher year-to-date, compared with the whole of 2014. We expect Saudi Arabia to maintain high levels of oil output regardless of the price, which should continue to underpin activity in the non-oil sectors through the rest of this year."
Key Findings
- PMI hits five-month high to signal marked improvement in business conditions
- Output, new orders and employment all rise at sharper rates
- Competitive pressures lead to slight reduction in charges
At 58.7, the headline 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 - was consistent with a marked improvement during August. Up from 57.7 in July, the latest reading was the highest in five months and only slightly below the long-run series average (59.1). It also signalled an acceleration in growth of the sector as a whole for the second month running.
The overall improvement in business conditions was supported by a sharper rise in new work during August. The rate of expansion quickened to a four-month high, amid reports that marketing initiatives and reputations for quality had helped to strengthen demand conditions. Higher new export orders also contributed to growth of total new business. The latest increase was robust overall, albeit slower than that registered in the prior month.
Reflective of the trend seen for new work inflows, Saudi Arabian non-oil private sector output rose sharply in August. The rate of growth accelerated to the fastest since March, with panellists commenting on a general improvement in market conditions.
Growth of purchasing activity at Saudi Arabian non-oil private sector firms also accelerated in August. The pace of expansion was the sharpest in five months and strong in the context of historical data. As a result, input stocks rose further, with the latest increase the most marked since October 2012.
The rate of job creation picked up in response to greater business requirements, according to August's survey data. The rise in employment was solid overall, and broadly in line with the average recorded over more than six years of data collection.
Meanwhile, total input costs increased further in August, driven by ongoing rises in both salaries and purchase prices. That said, the respective rates of expansion slowed since July, and led to an overall easing in cost pressures.
Subsequently, Saudi Arabia's non-oil private sector companies reported a renewed fall in selling prices, thereby ending a three-month period of inflation. Data suggested that weaker cost inflation contributed to the decline, while anecdotal evidence blamed competitive pressures. However, the pace of reduction was only fractional overall.
-Ends-
The next Saudi Arabia PMI Report will be published on October 5th 2015 at 08:30 (RIYADH)
For further information, please contact:
Ibrahim Sowaidan
Head - Group Corporate Affairs
Emirates NBD
Telephone: +971 4 609 4113 / +971 50 6538937
e-mail: ibrahims@emiratesnbd.com
Khatija Haque
Head of MENA Research, Emirates NBD
Email: KhatijaH@emiratesnbd.com
Malek Abderahman
ASDA'A Burson-Marsteller
Jeddah, Kingdom of Saudi Arabia
Mobile: 0544426364
Tel: 0126067202, Ext: 200
malek.abdelrahman@bm.com
Joanna Vickers
Corporate Communications
Markit
Tel: +44-207-260-2234
Email: joanna.vickers@markit.com
Philip Leake
Economist
Markit
Tel: +44-1491-461014
Email: philip.leake@markit.com
The Emirates NBD Saudi Arabia Purchasing Managers' Index is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 private sector companies, which have been carefully selected to accurately represent the true structure of the Saudi non-oil economy, including manufacturing, services, construction and retail. The panel is stratified by Standard Industrial Classification (SIC) group, based on industry contribution to GDP. Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month. For each of the indicators the 'Report' shows the percentage reporting each response, the net difference between the number of higher/better responses and lower/worse responses, and the 'diffusion' index. This index is the sum of the positive responses plus a half of those responding 'the same'.
The Purchasing Managers' Index™ (PMI™) is a composite index based on five of the individual indexes with the following weights: New Orders - 0.3, Output - 0.25, Employment - 0.2, Suppliers' Delivery Times - 0.15, Stock of Items Purchased - 0.1, with the Delivery Times index inverted so that it moves in a comparable direction.
Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change. An index reading above 50 indicates an overall increase in that variable, below 50 an overall decrease. Markit do not revise underlying survey data after first publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series.
About Emirates NBD
Emirates NBD is a leading banking Group in the region. As at 30th June 2015, total assets were AED 388.1 Billion, (equivalent to approx. USD 105 Billion). The Group has a leading retail banking franchise in the UAE, with more than 220 branches and over 900 ATMs and CDMs in the UAE and overseas. It is a major player in the UAE corporate and retail banking arena and has strong Islamic banking, Global Markets & Treasury, Investment Banking, Private Banking, Asset Management and Brokerage operations.
The Group has operations in the UAE, Egypt, the Kingdom of Saudi Arabia, Singapore, the United Kingdom and representative offices in India, China and Indonesia.
The Group is an active participant and supporter of the UAE's main development initiatives and of the various educational, environmental, cultural, charity and community welfare establishments.
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The intellectual property rights to the Emirates NBD Saudi Arabia PMI™ provided herein are owned by or licensed to Markit. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without Markit's prior consent. Markit shall not have any liability, duty or obligation for or relating to the content or information ("data") contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers' Index™ and PMI™ are either registered trade marks of Markit Economics Limited or licensed to Markit Economics Limited. Emirates NBD use the above marks under licence. Markit is a registered trade mark of Markit Group Limited.
© Press Release 2015
