Saudi nonoil sector records solid growth

Growth in business activity in Saudi Arabia’s nonoil private sector rose to a nine-month high in April, boosted by strong output and new orders, a survey showed. April Purchasing Managers’ Index (PMI) data was reflective of strong demand conditions in the Saudi Arabian nonoil private sector economy, said the report issued by the Saudi British Bank (SABB) and HSBC. SABB has published the results of the headline SABB HSBC Saudi Arabia PMI for April 2012. The PMI reflects the economic performance of Saudi Arabian nonoil producing private sector companies through the monitoring of a number of variables, including output, orders, prices, stocks and employment. The monthly report said growth of both output and new business accelerated from March readings, taking the latter above its series trend. Firms also demonstrated their confidence in current and future business conditions by taking on new staff, increasing purchasing activity and accumulating stocks. Rising from March’s reading of 58.7, the headline PMI posted 60.4 in April. Registering above the series trend, it was the highest reading for nine months, and signaled another marked improvement of operating conditions across the KSA non-oil private sector. New business rose markedly during the latest survey period, and at an accelerated rate, according to the SABB statement. Respondents commented on improved demand conditions and more business from government contracts. Data suggested that the domestic market remained a key driver of new order growth, according to the report. To accommodate gains in new business, Saudi Arabia’s nonoil private sector firms raised output during April. The rate of growth was sharp and above the trend for 2012 so far. With new order growth continuing to outstrip the expansion in output, levels of unfinished business continued to build at Saudi Arabia’s nonoil private sector companies. The accumulation of backlogs was solid, and the seventh in as many months. In order to keep up with rising business requirements, companies raised both employment and purchases during April. Job creation was the most marked for nearly a year, while buying activity increased at a joint series-record pace. As a result of higher acquisitions, input stocks at Saudi Arabian non-oil private sector firms accumulated at a steeper pace. Panelists stated that holdings were increased as expectations of new order growth were positive. Cost inflation accelerated during April to a new survey record, pushed up by higher purchasing prices for raw materials and fuel, as well as higher staff costs. To protect profit margins, and in light of strong demand, non-oil private sector firms increased their own tariffs at a solid pace.