Saudi Arabia Business Conditions Continue to Improve

September 04, 2012 /

Business conditions facing nonoil private sector companies operating in Saudi Arabia have achieved another
robust improvement as the country’s Purchasing Managers’ Index (PMI) for August went up from 58.1 in July to 58.3 a month later.

The Saudi British Bank has published the results of the headline SABB HSBC Saudi Arabia PMI for August 2012 – a monthly report issued by the bank and HSBC. It reflects the economic performance of Saudi Arabian non-oil producing private sector companies through the monitoring of a number of variables, including output, orders, prices, stocks and employment.

Behind the slight uptick in the headline number was a more marked increase in incoming new business, which
anecdotal evidence attributed to a range of factors including greater sales and marketing efforts and
improving market conditions. In addition, a number of firms also linked higher intakes of new work to
increased construction activity. New work from foreign clients also increased during August, though the rate of growth was at a 21-month low.

Output levels at Saudi Arabia non-oil private sector businesses increased markedly in August. Unlike the
trend in new orders, however, growth of activity was the weakest since last October. Job creation also eased slightly, with overall employment levels rising at the slowest pace for five months.

Backlogs of work at KSA non-oil private sector companies accumulated for the tenth time in the past 11
months in August, after falling marginally during the previous survey period. The increase was solid
compared to the historical series trend and generally associated by respondents with greater intakes of new

With workloads increasing on the month, purchasing activity among KSA non-oil private sector companies
continued to rise. The pace of expansion was broadly unchanged from that registered in July, and sufficient
for a further (albeit weaker) increase in stocks of purchases. Many firms that built pre-production
inventories noted expectations for growth in activity over the coming months.

Despite input buying increasing, suppliers’ delivery times shortened again during August. Competition
among vendors and faster payments were reportedly behind the improvement in performance, which was of a
similar magnitude to that registered one month previously.

August data showed that prices charged by businesses operating in Saudi Arabia’s non-oil private sector
economy decreased for the first time in over three years of data collection. Although only slight, the reduction in selling prices contrasted with a further rise in average costs.

Overall input price inflation was slightly stronger than July’s seven-month low, and underpinned by growth of both purchasing and staff costs. The former rose relatively quicker over the month, with the costs of a range of raw materials pushed higher by stronger demand.


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