Companies also stepped up recruitments in April in order to keep up with rising business requirements, according to the monthly report issued by the Saudi British Bank (SABB) and HSBC.
The report highlights the results of the headline SABB Saudi Arabia Purchasing Managers’ Index (PMI) for April 2011.
It reflects the economic performance of Saudi nonoil producing private sector companies and establishments through the monitoring of a number of variables, including output, new orders, exports, input prices, output prices, quantity of purchases, stocks and employment.
There was little evidence that political problems in other parts of the Middle East were significantly affecting the performance of Saudi Arabia’s nonoil private sector economy at the start of Q2.
Although rates of expansion in output and new business slowed since March, they remained above their respective series trends. Firms demonstrated their confidence in current and future business conditions by taking on new staff and stock building.
The survey, however, said input price inflation accelerated to a series record high and global instabilities contributed to rising purchasing costs.
Almost unmoved from March’s reading of 62.8, the headline PMI posted 62.7 in April.
Although it was the lowest for four months, the latest reading was still above the series trend and signaled another marked improvement in operating conditions across the Kingdom’s nonoil private sector.
New business rose strongly during the latest survey period, albeit at a slightly weaker rate. Respondents commented on improved economic conditions and more business from the government.
Data suggested that the domestic market remained the main driver of new order growth.
To accommodate gains in new business, Saudi nonoil private sector firms raised output during April. However, the rate of growth was the mildest for six months. By company size, large firms posted a sharper increase in activity than small and medium enterprises (SMEs).
A combination of greater market demand, pipeline delays due to the crisis in Japan and backlogs at the country’s ports led to a faster build up of outstanding business at Saudi nonoil private sector firms in April. The rate of accumulation was a joint-series record as a result.
Companies raised both employment and purchases in April in order to keep up with rising business requirements. Job creation was the most marked since December 2009, while buying activity increased at a similar pace to that recorded in March.
Average vendor performance continued to improve in April, albeit at the weakest rate in the survey history. Panel members indicated that the slowdown reflected supply disruptions from the Japan crisis and delays at customs.
As a result of higher input acquisitions, input stocks at Saudi Arabian nonoil private sector firms accumulated at a steeper pace. Panelists stated that holdings were increased partly in expectation of future new order growth and also to safeguard against supply disruptions.
Purchasing price inflation accelerated to a joint-series record high during April, pushed up by rising raw material and fuel costs. Firms stated that unfavorable exchange rates and political instabilities in the Middle East and North Africa region contributed to higher commodity prices. Staff cost inflation also picked up on the month. Overall input costs rose fastest at large companies.
To protect profit margins from rising input costs, firms increased their tariffs in April. Charge inflation was the sharpest for almost a year.
Nonoil private sector growth remains strong in Kingdom
Publication Date:
Wed, 2011-05-04 01:53
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