JEDDAH: A recent surge in new orders has meant business conditions in the Kingdom’s non-oil sectors have risen to the highest levels in more than a year.
According to the latest monthly IHS Markit Saudi Arabia Purchasing Managers’ Index (PMI), the rating for December was 57, up from 54.7 in November, and the highest level since November 2019. Any figure greater than 50 indicates overall improvement in the sector.
“The Saudi Arabian non-oil economy is well on the path to recovery,” said David Owen, an economist at IHS Markit.
“According to respondents, business activity has been helped by falling COVID-19 case numbers in the fourth quarter of 2020, despite other major economies suffering a second wave. The rollout of a vaccine meanwhile led to increased optimism that demand will strengthen over the coming year,” Owen added.
The growth in December was attributed to an uptick in new business, which came after improved market demand and price discounting by companies.
The new orders were driven mainly from the domestic market, with just a modest increase in exports from overseas. In addition to new orders for work, survey respondents also reported that ongoing projects were also performing better, leading to a higher overall workload during the last month of 2020.
“On the negative side, the latest expansion did not support a rise in job numbers during December. In fact, employment fell slightly as firms diverted spending towards inputs and noted that current capacity still allowed them to clear both new and outstanding work,” Owen said.
While orders were up, the price inflation seen over the last five months leading up to December began to subside, as companies increasingly offered discounts in order to entice new customers and shift stock towards the end of the year.
Looking to 2021, expectations for the year are high, with optimism boosted by the global approval of COVID-19 vaccines and hope that business conditions will return to normal in the Kingdom.
“The degree of sentiment rose to its highest level seen throughout 2020,” the report said.