Emirates NBD Saudi Arabia PMI™

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.