Business conditions improve at weakest pace in series history
Riyadh: Growth of Saudi Arabia's non-oil private sector eased in January, continuing the trend seen through much of the latter part of 2015. In fact, business conditions improved at the weakest pace in the survey's six-and-a-half year history, with a muted rise in new work the key factor behind the slowdown. Total new business was restricted in turn by a negligible increase in new export orders. Similarly, relatively subdued growth was seen in output, employment and input buying. Meanwhile, purchasing costs rose only modestly, allowing firms to lower charges in an effort to attract new clients.
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 slowdown in the non-oil sectors is in line with our expectations as the economy adjusts to lower oil prices and fiscal policy is adjusted accordingly. Global financial market volatility in the first weeks of 2016, and increased concerns about Chinese and global growth are likely to have weighed on sentiment, and may have contributed to the sharp slowdown in new export orders last month."
Key Findings
- PMI falls to second consecutive record low
- Growth of new business slows amid near-stagnation in exports
- Tariffs drop for third month running
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 - slipped to a survey-record low (53.9) for the third time in the past four months during January. Previous low points came in October (55.7) and December (54.4), and the latest reading signalled a continuation of the general trend seen towards the end of 2015. However, by remaining well clear of the neutral 50.0 mark, the index still signalled solid growth overall.
The fall in the headline index was driven in part by a slower expansion in new business at the start of 2016. Though remaining marked overall, the latest rise was the weakest in the series history. Data showed that a near-stagnation in new work from abroad was a factor behind the overall easing - the rate of export growth was by far the slowest on record. Where new clients were secured, panellists commented on better marketing and lower charges.
Output also rose more slowly in January, though the pace of expansion held up better than that for new work. Higher activity was widely linked to new project start-ups.
Non-oil private sector employment in Saudi Arabia increased further during January. Contrasting with the overall slowdown, the rate of hiring picked up from December's low. That said, jobs growth was still muted compared with the series trend. Meanwhile, latest data showed backlogs of work rising again, albeit only marginally.
Companies' purchasing reflected the relative weakness of new work inflows in January, as input buying rose at the slowest pace since the survey began in August 2009. The rate of inventory accumulation also eased, but there were still reports of stocks being built up in anticipation of stronger demand.
On the price front, the rate of total input cost inflation was little-changed from the survey-record low seen in the final month of 2015. Purchase prices showed a similar trend, rising only modestly amid greater competition among suppliers.
Firms were subsequently able to cut their tariffs for the third straight month. Though marginal, the latest fall marked the longest sequence of decline since the survey's inception back in 2009.
-Ends-
The next Saudi Arabia PMI Report will be published on March 3rd 2016 at 08:30 (RIYADH) / 05:30 (UTC)
About
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 31st December 2015, total assets were AED 406.6 Billion, (equivalent to approx. USD 110.7 Billion). The Group has a leading retail banking franchise in the UAE, with more than 220 branches and over 940 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.
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 Khatija Haque
ASDA'A Burson-Marsteller; Dubai, UAE Head of MENA Research, Emirates NBD
Tel: 971-4-4507600; Fax: 971-4-4358040 Email: KhatijaH@emiratesnbd.com
Email: tricia.rego@bm.com
Joanna Vickers Philip Leake
Corporate Communications Economist
Markit Markit
Tel: +44-207-260-2234 Tel: +44-1491-461014
Email: joanna.vickers@markit.com Email: philip.leake@markit.com
© Press Release 2016
