Riyadh – Mubasher: Saudi Arabia’s non-oil private sector stood stable at the end of the first quarter of 2017, with sharp rates of expansion in new orders and output contributing to overall growth.
Companies raised input buying to the highest level in 18 months. Despite greater output requirements and increasing accumulated works, firms marginally raised the number of workers. Meanwhile, input price inflation climbed to a seven-month high, according to a survey by Emirates NBD and IHS Markit.
“Saudi Arabia's non-oil economy appears to be holding up well amidst ongoing reductions in oil production. Unlike previous periods of expansion however, gains in output and new orders are not being matched by new job growth," head of research and chief economist at Emirates NBD Tim Fox said.
Fox noted that competitive pressures seem to press on the firms’ ability to raise prices.
The seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) registered 56.4 in March, to fall from February’s 18-month high of 57.0.
However, the survey showed that the latest reading was consistent with a marked improvement in the overall health of the sector. The PMI average hit a one-and-a-half years high and recorded 56.7 in the first quarter of the year.
The index reading of above 50 reflected sharp increases in output and new work, though the relevant expansion rates slowed since the previous month. Evidence indicated improvements in economic conditions, new projects, more construction work, and increased marketing efforts.
Higher pace of new business was mainly driven by domestic demand as the growth of new export orders retreated to its weakest in four months and was modest, the survey added.
Moreover, firms attributed the sharp rise of the purchase prices in March to higher demand for raw materials. However, businesses were restricted in their ability to fully pass on higher cost burdens to clients amid intense competition.
The report pinpointed that firms remained strongly optimistic towards output over the coming year due to projects in the pipeline, construction work, and expectations of further improvements in market demand.
