Non-oil private sector expansion cools at end of 2015

Riyadh, January 7th, 2016

Saudi Arabia's non-oil private sector suffered a loss of growth momentum at the end of 2015, with business conditions improving at the weakest pace in the survey's history. Weighing on the sector were slower expansions in output, new orders and employment. Staffing levels, in particular, barely rose in December. That said, growth rates for activity and new work remained sharp overall. Meanwhile, data for prices highlighted the impact of increased competition on both input costs and output charges. Cost pressures were the least marked since the survey began in 2009, while tariffs fell for the second month running.  

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.

"The latest PMI data show that although growth momentum has slowed in Q4 2015, the non-oil private sector still expanded at a solid rate at the end of last year.  This is consistent with the official estimate for non-oil private sector growth of 3.7%, which was released with the 2016 budget at the end of December."

Key Findings

§  PMI slips to survey-record low in December

§  Rates of growth in output, new business and employment all ease

§  Charges fall back-to-back for first time since 2013

Despite falling from 56.3 in November to 54.4, 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 - remained indicative of solid growth in December. However, the latest reading was a series low, and meant that the average for Q4 2015 was also the weakest on record (55.4).

The cooling in the overall rate of expansion was reflected by softer output growth in December. The latest rise was the slowest since January, although it remained steep overall. Anecdotal evidence linked higher activity to new projects secured as a result of better marketing.

New business showed a similar trend in December, with growth still marked but easing to the weakest in the series history. The intensity of competition was reportedly a factor restricting new order growth at some firms, though panellists indicated that this was far outweighed by the gains from promotional activities. New export work continued to rise solidly, with some firms benefitting in international markets due to their reputations for quality.

Relatively slow growth of new work led companies to raise their purchasing activity at the weakest pace in more than two years. That said, the rate of expansion was still sharp overall, and sufficient to contribute to a further build-up of input stocks in December.

On the jobs front, the rate of hiring eased to near-stagnation at the end of the fourth quarter. It was the weakest in the current 21-month period of expansion, with the vast majority of respondents (97%) seeing no change in employment.

Total input costs faced by Saudi Arabia's non-oil private sector firms increased further in December. The rate of inflation slowed to a record low, however, and was only modest overall. For the first time in over a year, purchasing costs rose at a weaker pace than salaries, as panellists pointed to greater price competition among suppliers.

Competitive pressures were also behind firms' decisions to cut charges for the second straight month - the first back-to-back decline since 2013. 

-Ends- 

The next Saudi Arabia PMI Report will be published on February 3rd 2016 at 08:30 (RIYADH) / 05:30 (UTC)

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

Tricia Rego    
ASDA'A Burson-Marsteller; Dubai, UAE 
Tel: 971-4-4507600; Fax: 971-4-4358040 
Email: tricia.rego@bm.com 
                                                                     
Khatija Haque
Head of MENA Research, Emirates NBD
Email: KhatijaH@emiratesnbd.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 September 2015, total assets were AED 390.4 Billion, (equivalent to approx. USD 106 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.

About Markit
Markit is a leading global diversified provider of financial information services. We provide products that enhance transparency, reduce risk and improve operational efficiency. Our customers include banks, hedge funds, asset managers, central banks, regulators, auditors, fund administrators and insurance companies. Founded in 2003, we employ approximately 4,000 people in 11 countries. Markit shares are listed on Nasdaq under the symbol MRKT. For more information, please see www.markit.com.

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 2016