05/04/2011
Kingdom’s firms continue to face rising input costs
A monthly report issued by the bank and HSBC
RIYADH: The Saudi British Bank (SABB) has published the results of the headline SABB HSBC Saudi Arabia Purchasing Managers' Index (PMI) for March 2011 - a monthly report issued by the bank and HSBC. It reflects the economic performance of Saudi Arabian nonoil producing private sector companies and establishments through the monitoring of a number of variables, including output, new orders, exports, input prices, output prices, quantity of purchases, stocks and employment.
Saudi Arabian nonoil private sector companies continued to benefit from favorable business conditions in March. Solid market demand boosted new order levels and led to another strong rise in output. There were indications that increased activity in the construction sector had supported domestic demand. However, firms continued to face sharply rising input costs and subsequently output prices increased at a stronger pace.
Registering 62.8 in March, the headline PMI was down on February's reading of 63.4. Nevertheless, the latest figure was consistent with a considerable improvement in operating conditions across the Saudi nonoil private sector.
Favorable economic conditions and increased activity in Saudi Arabia's construction industry were noted as key reasons for stronger market demand in March, according to panelists. Overall incoming new work rose at a sharp and accelerated pace on the month. Although foreign demand remained solid, new export business growth slowed since February.
Rising levels of new work put pressure on capacity during March. Despite another solid rise in employment, backlogs accumulated at a modest pace. Reports indicated that, in some cases, technical difficulties had caused delays to production processes.
In light of current inflows of new work, and in anticipation of further improvements in demand in the near future, the Kingdom's nonoil private sector firms raised buying activity and input stocks at marked rates in March.
Despite stronger demand for inputs, supplier delivery times continued to shorten during March, and at a faster rate. Panelists cited efficient service and competition amongst suppliers as the principal reasons for faster deliveries.
Purchase price inflation eased during the latest survey period to the weakest for three months. Nevertheless, the rate of increase remained substantial, which companies linked to higher fuel and raw material costs. Respondents made particular reference to increased prices for oil, metals, food and construction-related items. In contrast, staff costs rose at the fastest rate since last December as employees were rewarded for better company performance.
