Saudi non-oil economy keeps up growth momentum


Data also suggests that non-oil firms in Saudi are confident about the outlook

Dubai: Saudi Arabia’s non-oil private sector economic activity continued to expand in December with overall business activity new orders and employment all growing further, but at a slower pace, according to the Purchasing Managers’ Index (PMI) data compiled by IHS Markit.

While the headline PMI slipped to 56.9 in December from 58.3 in November, December data indicated that business activity growth eased for the second month running and was the slowest since October 2018.

“The latest Saudi Arabia PMI points to a short-term setback for the non-oil private sector, with growth of business activity and new work slipping since November,” said Tim Moore, Economics Associate Director at IHS Markit.

December PMI data showed total new business volumes increased sharply in December, but the pace of expansion moderated from the four-and-a-half year peak seen during November. Softer export sales were a headwind to overall demand, as signalled by a drop in new work from abroad for the first time since February.

Employment numbers increased for the ninth consecutive month across the non-oil private sector, albeit at only a marginal pace. Greater staff recruitment partly reflected rising pressure on business capacity, as suggested by a renewed increase in backlogs of work at the end of 2019.

Meanwhile, input buying expanded at a robust and accelerated pace in December. Higher levels of purchasing activity were linked to new order intakes and efforts to boost inventories. Reflecting this, the latest survey indicated one of the strongest rises in stocks of purchases seen over the past two years.

On the price front, input costs increased only marginally during December. The rate of inflation was the slowest for four months, which largely reflected a slower rise in average staff salaries.

Non-oil private sector companies remain optimistic about their growth prospects for the next 12 months. The degree of positive sentiment slipped a little since November, but remained comfortably above the levels seen in the middle of 2019. Survey respondents cited hopes of an improvement in underlying economic conditions and a corresponding rise in new business opportunities.

The survey continues to indicate a much stronger improvement in business conditions than at the same time during 2018, particularly in relation to new order books. Latest data also suggests that non-oil firms in Saudi Arabia are confident about the outlook for 2020, with business optimism holding at a much higher level than seen in the middle of last year,” said Tim Moore, Economics Associate Director at IHS Markit.