07/12/2010
Saudi business conditions improve
Headline index climbed to 62.2 in November
The Saudi British Bank (SABB) has published the results of the headline SABB HSBC Saudi Arabia Purchasing Managers' Index (PMI) for November 2010 — a monthly report issued by the bank and HSBC.
It reflects the economic performance of Saudi Arabian nonoil producing private sector companies and firms through the monitoring of a number of variables, including output, new orders, exports, input prices, output prices, quantity of purchases, stocks and employment.
The headline index climbed to 62.2 in November — its highest level to date — up from 59.9 in October. The reading signaled another sharp improvement in the health ofSaudi Arabia's nonoil private sector economy.
Underlying the improvement in the PMI were faster increases in output, new orders, employment and input stocks as well as a slower shortening of supplier lead times.
New order receipts at Saudi Arabian nonoil private sector companies grew substantially during November, and at the fastest rate for five months.
Panelists linked strongerdemand to an improved economic environment and good company reputations. Data suggested that the domestic market remained the key driver of total new business growth, although new export work rose at a slightly sharper rate than in October.
Further growth of new orders spurred businesses to raise output again during November. Activity levels rose rapidly since October and at a series record rate. However, this was not sufficient to clear work-in-hand, which continued to accumulate, and at a faster rate.
Companies hired extra staff, acquired additional inputs and built up stocks of purchases in November to accommodate new order growth and expectations of further expansion in the near future. All three increased at faster rates — the latter noticeably.
Despite greater demand for inputs from the Kingdom's nonoil private sector, supplier delivery times continued to shorten during the latest survey period. This suggests that workloads at vendors remained manageable. However, the rate of improvement moderated since October.
Input cost inflation across the Saudi Arabian nonoil private sector eased during November to a moderate pace. The slowdown reflected weaker rises in both purchasing and staff costs. While the latter eased to only a modest rate, the former remained marked.
Anecdotal evidence highlighted greater raw material and fuel prices as the key factors behind increased purchasing costs. Where wages were raised, panelists commented on better business conditions.
To compensate for rising input costs, but also to improve profit margins, Saudi Arabia's nonoil private sector companies increased their charges in November.
