KSA business conditions improve at fastest pace in four months

RIYADH: Growth of Saudi Arabia’s non oil private sector accelerated in March, but remained only slightly quicker than the survey-record low
seen at the start of the year.

Higher output was the main driver of the overall improvement in business conditions — the latest rise was the sharpest in four months. New orders, employment and input stocks also increased, but the respective rates of expansion were among the weakest in the series history.
With regard to prices, firms pointed to the downwards impact of competition. Input costs rose at the slowest pace on record, while charges fell for the fifth straight month.
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 PMI, Khatija Haque, head of MENA Research at Emirates NBD, said: “The March PMI points to solid growth in Saudi Arabia’s non-oil sector, despite low oil prices and budgetary pressure. Output and order growth remain robust, which is encouraging, although this is likely underpinned by still high oil production feeding through to the related manufacturing industries.”
Khatija Haque added: “Nevertheless, we expect GDP growth in the Kingdom to slow to 1.9 percent this year from 3.4 percent in 2015.”
The headline seasonally adjusted 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 — edged up to 54.5 in March, from 54.4 in February. The latest reading signalled a further pick-up in growth since the record low seen in January (53.9), but it was still well below the long-run trend (58.7).
As a result, the improvement in business conditions in Q1 (54.3) was the weakest on average since the survey began in 2009.
The rise in the headline index was underpinned by output growth in March. Activity increased at the strongest rate in four months, with better marketing and new project start-ups cited as the key contributing factors.
In contrast, growth of new business eased at the end of the first quarter. Though still robust overall, the rate of expansion was the second-weakest in 80 months of data collection.
Some panellists commented on a slowdown in market conditions stemming from low oil prices.
Nonetheless, there were multiple reports of improving client demand.
New export work showed a similar trend, with the latest increase solid but slower than the long-run average.
Saudi Arabia’s non-oil private sector firms raised their input buying in line with higher output requirements during March.
The latest increase was the quickest so far in 2016, but still subdued in the context of historical data. Subsequently, the rate of pre-production inventory building was one of the slowest in the series history.
Jobs growth moderated to a three-month low in March. The vast majority of monitored companies (96 percent) reported no change in staffing levels since February. Meanwhile, outstanding business rose only fractionally.
Finally, amid reports of increased supplier competition, the rate of input price inflation eased to a survey-record low in March.
This ensured that charges fell for a fifth successive month, thereby extending the longest sequence of decline since the survey’s inception back in 2009. Competitive pressures were again at work, leading firms to cut tariffs in order to attract new clients.