Growth in Saudi Arabia’s nonoil business activity accelerated in January for the third successive month to its highest rate since October 2012, thanks to rapid rises in output and new orders, according to a survey
The Saudi British Bank (SABB) has published the results of the headline SABB HSBC Saudi Arabia Purchasing Managers’ Index (PMI) for January 2014 — a monthly report issued by the bank and HSBC.
It reflects the economic performance of Saudi Arabia’s nonoil producing private sector companies through monitoring a number of variables, including output, orders, prices, stocks and employment.
At 59.7, the headline PMI remained comfortably above the 50.0 no-change mark during January to signal a further marked expansion of the Saudi Arabian non-oil producing private sector economy. Up from 58.7 in December and rising for a third month in succession, the PMI signaled the sharpest expansion since October 2012.
Growth was supported by rapidly rising levels of output and new orders. The former rose at its strongest rate for 15 months, amid reports of firmer operating conditions.
This helped to bolster confidence, and encourage firms to start new projects.
Providing a further fillip to output during January was a marked rise in new business.
Latest data showed that new work rose to the sharpest degree since September.
Rapidly growing domestic demand was complemented by strengthened foreign orders amid reports of an improving business climate.
New export orders rose at the fastest pace for three months, according to the latest survey.
With new orders continuing to rise, capacity remained under pressure at the start of 2014.
Backlogs of work increased for a twelfth successive month, albeit at the slowest pace since last July.
Panelists blamed rising business outstanding in part to a lack of available resources at their units.
To help alleviate these pressures, a number of companies added to their payroll numbers.
The net increase in staffing levels was the 28th in successive months and was the sharpest recorded since last March.
Meanwhile, on the price front, companies commented that market conditions remained competitive during January. This subsequently weighed on pricing power, with output charges little changed on the month.
January’s survey subsequently highlighted a lack of cost pass through by Saudi Arabian non-oil producing firms as input prices continued to rise markedly during the month.
Purchasing costs were the primary driver of overall inflation, although the latest increase was the slowest for five months.
Prices paid for salaries/wages rose at a relatively more modest pace.
Finally, purchasing activity was raised sharply again by companies at the start of 2014. Increased business requirements tended to underpin growth.
Efforts to add to stock were also a consideration, as panelists signaled positive expectations for production growth over the coming months.