Saudi business conditions see strongest improvement in 13 months

The health of Saudi Arabia’s non-oil private sector showed a strong improvement at the start of the year, driven by a surge in new orders and a subsequent rebound in both output and employment.

Businesses also reported stronger optimism towards the outlook for activity in 2019. This is according to the latest January data from the Emirates NBD Purchasing Managers’ Index (PMI) for Saudi Arabia released on Tuesday.

The survey showed Saudi PMI rise to 56.2 in January, from 54.5 in December, its highest reading for 13 months.

“The rise in the index reflected not only stronger growth in output, new orders and employment, but also a recovery in the rate of expansion in stocks of purchases,” said a statement.

The main positive takeaway in January was an acceleration in the rate of new order growth to the quickest since December 2017. The upturn owed almost exclusively to stronger domestic sales, with inflows of new business from abroad remaining broadly unchanged from the previous month.

The survey found business confidence towards growth prospects over the next 12 months improved for the second month in a row to reach the highest since December 2013.

Also Read: Saudi PMI recovers in August on higher output, orders

Stronger overall order books in turn drove a solid and accelerated increase in the level of output across Saudi Arabia’s non-oil private sector in January, with the rate of growth slightly above the average in the final quarter of 2018.

The month also saw the rate of job creation pick up from a 20-month low in December, albeit remaining only modest overall.

Also see: Saudi PMI rises to highest level this year

Businesses continued to use discounts as way to support sales at the start of the year. January saw average selling prices fall for the sixth time in the past seven months and at the quickest rate since last February, the statement said, adding that average staff pay across the non-oil private was up slightly on the month.

“The PMI survey showed only a modest rise in private sector jobs and wages last month, with 2.5 percent of firms surveyed reporting increased hiring and 2 percent reporting wage increases,” said Khatija Haque, Head of MENA Research at Emirates NBD.

“Business optimism about future output was the highest in more than five years in January 2019. The government has announced an ambitious budget for this year, with expenditure projected to rise more than 7 percent, as well as a number of initiatives to boost investment and expansion in the non-oil sectors of the economy, which likely contributed to positive business sentiment. The recovery in oil prices last month after a sharp sell-off in December 2018 likely also helped,” she added.