Growth in Saudi Arabia’s non-oil private sector picked up at the start of the third quarter on the back of sharper increases in output and new orders.
The headline seasonally adjusted Purchasing Managers’ Index (PMI) rose from 54.3 in June to 55.7 in July.
The main factors contributing to the upward trajectory of the non-oil private sector economy were sharper expansions in both new orders and output. Anecdotal evidence highlighted greater projects, good economic conditions, stronger underlying demand and higher construction activity.
Greater output requirements encouraged companies to purchase more inputs and stimulated job creation in the sector. Weakness was seen regarding trade, however, as new export orders fell.
“Faster growth in output and new orders helped the headline PMI in Saudi Arabia rise in July, signalling the fastest rate of non-oil sector expansion in three months. Firms were more optimistic last month, and this likely contributed to increased buying activity and inventory accumulation,” said Khatija Haque, Head of MENA Research at Emirates NBD.
On the price front, input costs rose at a solid and accelerated pace. However, firms’ ability to fully pass on higher cost burdens to customers was restricted by intense market competition and charges increased only marginally.
Underlying data provided evidence of ongoing pressures on operating capacity as backlogs rose for the ninth consecutive month. Subsequently, firms increased their payroll numbers, but only marginally.
In response to greater output requirements, businesses scaled up their purchasing activity during July. Moreover, the upturn in input buying was the quickest since April. Subsequently, inventories rose substantially.
Return of stability in Egypt
The downturn in the overall health of the non-oil private sector in Egypt eased in July, with the latest deterioration in business conditions the weakest in a year. At 48.6 at the start of the third quarter, the headline PMI index increased from 47.2 in June.
New orders stabilised during July, thereby ending a 21-month sequence of decline. Output declined at the slowest pace in 12 months, thereby leading to only a marginal fall in input buying.
In response to lower output requirements, firms in Egypt reduced their staffing levels. New export orders rose for the fourth consecutive month, but only marginally during July.
Input cost inflation in the country accelerated to the fastest since January. According to underlying data, price pressures emanated from higher purchasing prices, and to a lesser extent, staff costs. Reflecting higher input costs, firms raised output charges at the strongest pace since February.