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Non-oil private sector growth regains momentum in February
Riyadh, March 3rd, 2016
February data were consistent with a pick-up in growth of Saudi Arabia's non-oil private sector, following the weakest improvement in business conditions on record seen in the first month of 2016. Rates of expansion in output, new orders and employment all accelerated, leading to sharper rises in purchasing activity and input stocks. That said, growth rates were still subdued relative to their respective long-run averages. On the price front, total input costs rose only modestly. As a result, companies were able to lower their tariffs at the fastest pace in the series history amid greater competition.
The survey, sponsored by Emirates NBD and produced by Markit, contains original data collected from a monthly survey of business conditions in the Saudi private sector.
Commenting on the Emirates NBD Saudi Arabia PMITM, Khatija Haque, Head of MENA Research at Emirates NBD, said.
"The improvement in non-oil sector expansion in February is encouraging, particularly as external demand appears to have picked up after a particularly weak start to the year. Price discounting has also likely contributed to order growth last month. Overall, the data suggest that the non-oil economy in Saudi Arabia is growing despite low oil prices, albeit at a slower rate."
Key Findings
§ PMI picks up slightly from January's record low
§ Marked expansions in output and new work
§ Charges fall at fastest pace in series history
After adjusting for seasonality, the headline Emirates NBD Saudi Arabia Purchasing Managers' Index™ (PMI) - a composite gauge designed to give a single-figure snapshot of operating conditions in the non-oil private sector economy - posted 54.4 in February, up from January's survey-record low of 53.9. Though signalling a rebound in growth, the latest figure was well below the long-run series average (58.8). Nevertheless, it pointed to a solid improvement in business conditions overall.
Growth of the non-oil private sector as a whole was supported by further expansions in output and new work during February. Both increased more quickly than in January, with panellists commenting on a general improvement in client demand stemming from better marketing and discounted prices. That said, the rates of growth remained weaker than their respective trends.
Unlike in January, the rise in total new business was reinforced by a robust expansion in new export work during February. Export growth had eased to near-stagnation at the start of 2016, but the respective index picked up substantially as stronger commercial strategies in foreign markets came to fruition.
With new orders rising at a faster pace, growth of purchasing activity picked up in February. The latest expansion was robust overall, albeit slower than those seen throughout 2015. Pre-production inventories also rose, with the rate of increase quickening from January's 49-month low.
A larger workforce was another factor behind growth at Saudi Arabia's non-oil private sector firms. Though modest, the pace of job creation was the most marked in four months. Meanwhile, backlogs of work rose only marginally in February.
The rate of input price inflation remained subdued in the context of historical data during February. Both salaries and purchasing costs increased modestly, with the rise in the latter restricted by competitive pressures among suppliers.
Subsequently, firms were able to cut their charges for the fourth successive month. With cost pressures muted and competition for clients still fierce, selling prices fell at the sharpest rate in the series history.
-Ends-
The next Saudi Arabia PMI Report will be published on April 5th 2016 at 08:30 (RIYADH) / 05:30 (UTC)
For further information, please contact:
Ibrahim Sowaidan
Head - Group Corporate Affairs
Emirates NBD
Telephone: +971 4 609 4113 / +971 50 6538937
e-mail: ibrahims@emiratesnbd.com
Tricia Rego
ASDA'A Burson-Marsteller; Dubai, UAE
Tel: 971-4-4507600; Fax: 971-4-4358040
Email: tricia.rego@bm.com
Khatija Haque
Head of MENA Research, Emirates NBD
Email: KhatijaH@emiratesnbd.com
Joanna Vickers
Corporate Communications
Markit
Tel: +44-207-260-2234
Email: joanna.vickers@markit.com
Philip Leake
Economist
Markit
Tel: +44-1491-461014
The Emirates NBD Saudi Arabia Purchasing Managers' Index is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 private sector companies, which have been carefully selected to accurately represent the true structure of the Saudi non-oil economy, including manufacturing, services, construction and retail. The panel is stratified by Standard Industrial Classification (SIC) group, based on industry contribution to GDP. Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month. For each of the indicators the 'Report' shows the percentage reporting each response, the net difference between the number of higher/better responses and lower/worse responses, and the 'diffusion' index. This index is the sum of the positive responses plus a half of those responding 'the same'.
The Purchasing Managers' Index™ (PMI™) is a composite index based on five of the individual indexes with the following weights: New Orders - 0.3, Output - 0.25, Employment - 0.2, Suppliers' Delivery Times - 0.15, Stock of Items Purchased - 0.1, with the Delivery Times index inverted so that it moves in a comparable direction.
Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change. An index reading above 50 indicates an overall increase in that variable, below 50 an overall decrease. Markit do not revise underlying survey data after first publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series.
About Emirates NBD
Emirates NBD is a leading banking Group in the region. As at 31st December 2015, total assets were AED 406.6 Billion, (equivalent to approx. USD 110.7 Billion). The Group has a leading retail banking franchise in the UAE, with more than 220 branches and over 940 ATMs and CDMs in the UAE and overseas. It is a major player in the UAE corporate and retail banking arena and has strong Islamic banking, Global Markets & Treasury, Investment Banking, Private Banking, Asset Management and Brokerage operations.
The Group has operations in the UAE, Egypt, the Kingdom of Saudi Arabia, Singapore, the United Kingdom and representative offices in India, China and Indonesia.
The Group is an active participant and supporter of the UAE's main development initiatives and of the various educational, environmental, cultural, charity and community welfare establishments.
About Markit
Markit is a leading global diversified provider of financial information services. We provide products that enhance transparency, reduce risk and improve operational efficiency. Our customers include banks, hedge funds, asset managers, central banks, regulators, auditors, fund administrators and insurance companies. Founded in 2003, we employ approximately 4,000 people in 11 countries. Markit shares are listed on Nasdaq under the symbol MRKT. For more information, please see www.markit.com.
The intellectual property rights to the Emirates NBD Saudi Arabia PMI™ provided herein are owned by or licensed to Markit. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without Markit's prior consent. Markit shall not have any liability, duty or obligation for or relating to the content or information ("data") contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers' Index™ and PMI™ are either registered trade marks of Markit Economics Limited or licensed to Markit Economics Limited. Emirates NBD use the above marks under licence. Markit is a registered trade mark of Markit Group Limited.
© Press Release 2016
