Dubai: Saudi Arabia’s non-oil private sector saw a further improvement in growth momentum at the start of 2017 amid reports of favourable economic conditions and improving underlying demand.
The latest upturn was led by sharp increases in output and new business, with data also pointing to improved client demand across foreign markets. Employment increased only marginally, however, despite rising volumes of unfinished work. On the price front, charges rose for the third successive month amid a further increase in input costs.
“The rise in Saudi Arabia’s PMI to the highest level in 17 months is an encouraging start to the year, particularly as it reflects faster output and new order growth in January. Firms also appear to be more optimistic about the coming 12 months,” said Khatija Haque, Head of MENA Research at Emirates NBD.
Volumes of incoming new business rose at the sharpest pace in 14 months in January. A number of panellists mentioned that promotional activities had resulted in sales. Another factor leading total new work to increase was a marked expansion in new export work, which reportedly occurred as firms offered internationally competitive prices.
Companies in Saudi Arabia’s non-oil private sector raised their input buying in order to cater for increased output requirements. Though weaker than the series average, the rate of expansion was sharp overall, and underpinned the fastest rate of inventory accumulation in 16 months.
Cost pressures
Egypt’s non-oil private sector began 2017 in the same way that it ended 2016, with economic conditions worsening again. Underpinning the downturn were ongoing reductions in output and new orders. On the price front, greater cost pressures led firms to raise their average prices charged at the sharpest rate in the survey history to date. Firms were reluctant to take on additional staff, and employment dipped for the twentieth straight month.
“January’s survey provides little evidence that an economic recovery is yet underway at the start of 2017. It is, however, encouraging that the new ‘Future Output Index’ of the PMI suggests that firms have become increasingly optimistic on the economic outlook following November’s devaluation of the EGP,” Jean-Paul Pigat, Senior Economist at Emirates NBD, said.
The headline PMI posted below the crucial 50-mark for the sixteenth month in succession. Despite rising from 42.8 in December to 43.3 at the start of 2017, the latest reading was consistent with a sharp deterioration in business conditions.
