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More Exports Drive Nonoil Private Sector Growth


Middle East : 09 November 2012

Source: Arab News

The Saudi British Bank (SABB) has published the results of the headline SABB/HSBC Saudi Arabia Purchasing Managers’ Index (PMI) for October 2012 — a monthly report issued by the bank and HSBC. It reflects the economic performance of Saudi Arabian¬†non-oil¬†producing private sector companies through the monitoring of a number of variables, including output, orders, prices, stocks and employment.

The seasonally adjusted SABB/HSBC Saudi Arabia PMI posted 59.8 in October, down slightly from September’s four-month high of 60.3. The latest reading was in line with average for the 39-month survey history.

Underpinning the latest improvement in operating performance were further increases in both output and new business. Rates of expansion slowed marginally from recent highs, but nonetheless remained substantial and above survey averages. Companies reported that the domestic market remained the prime source of new orders, reflecting improving sentiment and successful marketing initiatives.

Levels of new export business also continued to rise in October, despite signs of slower growth of the global economy in recent months. Survey respondents mainly linked improved foreign demand to gains in new business from within the GCC.

Strong growth of new business increased the pressure on capacity in the nonoil-producing sector. This was highlighted by a series-record increase in levels of work-in-hand (but not yet completed) in October. Subsequently, companies increased employment for the 13th successive month.

Increased demand for their products and services improved the pricing power of Saudi Arabian nonoil producing companies in October. Average selling prices rose for the second successive month and at the fastest rate since June 2011. There were also reports of charges being raised in line with higher input costs.

Overall input prices posted a further increase during the latest survey period, reflecting higher staff costs and purchase prices. The steeper inflation was signaled for purchasing costs, which rose for four months.

Average wages and salaries were only moderately higher than in September, with the vast majority of companies reporting no change.

Purchasing activity rose sharply in October, continuing a trend observed throughout the survey history.

Companies raised input buying volumes in response to increases in business activity and incoming new work.

Part of the rise in purchasing reflected a preference for expanded stock holdings, in line with panelist’s expectations of further output and demand growth in coming months. Average supplier performance also continued to improve.

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