Saudi non-oil sector grows in October

Thursday, 18 November 2010 00:39 - - {{hitsCtrl.values.hits}}

Strengthening domestic demand led to an improvement in overall business conditions in the Saudi Arabian non-oil producing private sector during October, according to Saudi British Bank (SABB).

Although growth of new export work slowed since September, the expansion in total new orders accelerated, leading companies to increase both activity and employment levels, the bank said in its “SABB-HSBC Purchase Managers’ Index (PMI), a composite indicator designed to provide a single-figure snapshot of the performance of the non-oil producing private sector, for October.

However, price pressures built up alongside demand, with both total input and output price inflation accelerating on the month, it added.

Rising to 59.9 in October, from 58.4 in September, the PMI signalled a sharp gain in the health of the economy. Moreover, the rate of improvement was faster than the series trend, it stated.

The total new order receipts at Saudi private sector companies rose substantially in October and at the fastest rate since July. This was despite growth of new export business easing to a series record low.

Panellists cited favourable economic conditions, greater demand and successful promotional activities as the key factors driving overall new order levels higher.

Greater volumes of new work led the Kingdom's private sector firms to raise output, employment and purchasing more sharply in October, the SABB report said.

Activity increased at a considerable pace, while job creation was solid. Growth in both variables was the fastest since June. Meanwhile, buying activity expanded substantially, it stated.

The volume of unfinished business at Saudi private sector firms grew in October, bringing the current run of accumulation to ten months. The rate of increase was solid and the most marked since July. Panellists attributed the rise to heavier workloads, the report said.

Total input price inflation accelerated to a solid rate in October. Data showed that faster rises in both purchasing and wage costs supported the latest increase.

'Prices paid for raw materials and semi-finished goods climbed sharply and at a series record rate. Higher commodity costs and unfavourable exchange rate fluctuations were the key contributors to purchasing price inflation,' according to respondents.

Meanwhile, salaries rose moderately, which panel members linked to higher production and solid business conditions.

As a result, private sector companies passed on part of their greater cost burdens to customers last month through higher charges, the SABB report added.