Business conditions in Saudi Arabia's non-oil private sector expanded at a faster rate in October supported by strong demand and rising new work inflows, a survey showed on Wednesday.
The companies surveyed reported improving domestic economic conditions and softening inflationary pressures, which led to the most optimistic outlook for future output since the beginning of 2021.
The seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers' Index rose to 57.2 in October from 56.6 in September. Readings above 50.0 indicate expansion in activity. The October reading was also the second-highest in a year, recording only slightly below August's recent high.
"Saudi Arabian non-oil businesses signalled a strong degree of confidence in future economic conditions in October. The outlook for the next 12 months rose to its highest level since the beginning of 2021, as firms suggested that the current robust level of growth is likely to continue," said Naif al-Ghaith, chief economist at Riyad Bank.
The PMI is a weighted average of the following five indices: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%).
The two biggest components, the Output and New Orders indices, continued to expand in both activity and sales at the start of the fourth quarter. Sales growth was supported by rising demand from foreign markets during October with new export orders increasing at the sharpest rate in almost a year.
"Over a third of survey respondents noted that new orders had increased since the previous survey in September. This was helped by a softening of price pressures; input costs rose at the slowest pace since February, which translated into only a modest uptick in selling charges," said Al-Ghaith.
Output expansions were seen in the manufacturing, construction, wholesale & retail and services categories, with the strongest upturn registered among goods producers.
Businesses also reported a slight increase in employment, which supported a further reduction in backlogs of work.
Inflationary pressures softened notably in October, with companies reporting the slowest rise in input costs for eight months. Output charges subsequently rose only modestly, with upticks led by wholesale & retail and services firms.
(Writing by Brinda Darasha; editing by Seban Scaria)