Kingdom’s nonoil business activity accelerates in June

Updated 03 July 2014

Kingdom’s nonoil business activity accelerates in June

Growth in Saudi Arabia’s nonoil business activity rose to a five-month high in June, bolstered by strong growth in output and new orders, a survey showed.
The Saudi British Bank (SABB) has published the results of the headline SABB HSBC Saudi Arabia Purchasing Managers’ Index (PMI) for June 2014 — a monthly report issued by the bank and HSBC.
It reflects the economic performance of Saudi Arabian nonoil producing private sector companies through monitoring a number of variables, including output, orders, prices, stocks and employment.
June data signalled the continued expansion of the Saudi Arabian nonoil private sector, with the seasonally adjusted headline PMI recording 59.2, up from 57.0 in May.
This highlights a strong improvement in operating conditions and the highest since January.
The improvement in the headline PMI partly emanated from stronger growth in both output and new orders, while record-high buying activity was recorded. The pace of output growth quickened to a 26-month high. New business from abroad also improved, albeit at a slower pace than total new orders.
Companies sought to meet rising demand by ramping up output. Firms also recorded a further increase in backlogs of work as new business rose sharply. However, the rate of accumulation was slower than in the previous month and was moderate overall.
In response to growing signs of capacity constraints at their units, Saudi Arabian nonoil private sector firms increased their workforce numbers for a third successive month.
The net rise in employment was solid overall, with the latest increase the fastest in the current sequence of job creation.
Panellists signalled strong levels of optimism for growth by continuing to increase their purchasing activity during June. The latest data indicated the sharpest rise in input buying since the survey began in August 2009, as companies expanded their inventories in order to meet current levels of demand and in anticipation of higher future workloads. Consequently, stocks of purchases continued to build in June and the rate of increase was the sharpest in four months.
In spite of strong demand for inputs, average delivery times continued to improve. Better vendor performance was encouraged by a competitive market that required shorter delivery times.
Overall input costs in Saudi Arabia’s nonoil private sector continued to rise in June, and at a faster pace than the previous three months. Staff cost increases were marginal, with purchase prices the driving force behind the rise in overall input costs. Panellists linked higher purchasing costs to a strong level of demand present in the economy.
In response to increased cost inflation, companies raised their selling prices, albeit marginally, during June. The pace of expansion was fractional overall, with the vast majority of the panel reporting no change from the previous month.


Saudi Arabia expects to reduce spending as it seeks to shrink deficit

Updated 30 September 2020

Saudi Arabia expects to reduce spending as it seeks to shrink deficit

 

LONDON: Saudi Arabia plans to reduce spending next year by about 7.5 percent to SR990 billion ($263.9 billion) as the Kingdom seeks to reduce its deficit. It compares to spending of SR1.07 trillion this year it said in a preliminary budget statement.
It anticipates a budget deficit of about 12 percent this year falling to 5.1 percent next year.
The Kingdom released data on Wednesday showing that the economy contracted by about 7 percent in the second quarter as regional economies faced the twin blow of the coronavirus pandemic and continued oil price weakness.
The unemployment rate among Saudis increased to 15.4 percent in the second-quarter compared to 11.8 percent in the first quarter of the year.
The challenging headwinds facing regional economies is expected to spur activity across debt markets as countries sell bonds to help fund spending.
Saudi Arabia has already issued about SR84 billion in sukuk year to date.
“Over the past three years, the government has developed (from scratch) a well-functioning and increasingly deeper domestic sukuk market that has allowed it to tap into growing domestic and international demand for Shariah-compliant fixed income assets,” Moody’s said in a statement on Wednesday. “This, in turn, has helped diversify its funding sources compared to what was available during the oil price shock of 2015-16 and ease liquidity pressures amid a more than doubling of government financing needs this year.”