Saudi Arabia Non-oil Sector Slows

Kimberly Watson, Editor in Chief
August 07, 2012 /

July data signalled a slight slowdown in the rate of expansion of Saudi Arabia’s non-oil private sector economy.

Output and new orders both grew at weaker rates, though job creation was maintained at a pace that was unchanged since the previous survey period.
Meanwhile, rates of input and output price inflation were the weakest in 2012 so far.

Business conditions facing KSA private sector firms continued to improve during July, as signalled by the seasonally adjusted SABB HSBC Saudi Arabia Purchasing Managers’ Index™ (PMI™) posting 58.1.

However, down from 59.7 in June, the index was the lowest since last December and below the average recorded since data collection started three years ago.

Output levels and new order intakes both increased at slower rates in July – the weakest for nine and seven months respectively. Nevertheless, rates of growth in each case were still marked overall, with businesses continuing to add to their payroll numbers as a result.

New orders placed with KSA private sector businesses from international clients increased again during July. However, growth was at a four-month low and down on the rate of expansion of total new business, implying the domestic economy remained a key factor behind ongoing expansion.

July saw backlogs of work decrease for the first time since last September, and for only the second month in a period that stretches back over two-and-a-half years. That said, the rate of decline was only marginal overall.

In line with the trends in activity and new business, purchasing activity and pre-production inventory levels at Saudi Arabia non-oil private sector firms both increased at slower rates during July.

Meanwhile, data showed that suppliers’ delivery times shortened for the twelfth consecutive month, and at a rate that was the steepest since April. Reports from survey respondents suggested that a combination of competition among vendors, buyer demands and improved payment practises had led to faster lead times.

Input price inflation eased in July to the slowest since last December, as both purchase prices and labour costs grew at slower rates. In fact, salaries and wages increased only slightly on average over the month.

Output price inflation also eased to a seven-month low in July, and was only modest compared to the historical trend.


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