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Saudi non-oil private sector growth picks up momentum

Egypt business conditions worsen for seventeenth straight month

Image Credit: Reuters
The Kingdom Centre Tower in Riyadh. Business conditions in Saudi Arabia are at the quickest rate since August 2015.
Gulf News

Dubai: Saudi Arabia’s non-oil private sector saw a further pick-up in growth momentum in February, with business conditions improving at the quickest rate since August 2015.

Output and new orders rose sharply in February, with the rate of expansion in the latter picking up to an 18-month high. Firms raised their input buying at a steep pace to accommodate higher output and due to projections of further improvements in market demand in the coming months.

Despite the robust upturn in new work, the rate of job creation remained only slight, however. On the price front, ongoing cost pressures led firms to raise their output charges for the fourth consecutive month.

“Faster output and new orders were the main driver behind the higher PMI reading in February, signalling faster growth in the non-oil private sector last month. However this has yet to translate into increased employment in the sector. Nevertheless, firms appear to be relatively optimistic about prospects for the coming year,” said Khatija Haque, head of Mena research at Emirates NBD.

Higher raw material costs was the primary factor behind another increase in total input costs as wage inflation remained comparatively mild. The rate of output inflation was modest, however. According to panellists, competitive pressures had restricted firms’ abilities to pass on higher input costs to clients.

The Egyptian non-oil private sector continued on a downward path in February, as business conditions worsened for the seventeenth straight month. The latest downturn was led by sharp declines in both output and new work. However, the respective rates of contraction softened since January.

Firms reduced their payroll numbers again due to lower output requirements. Meanwhile, the weak exchange rate relative to the US dollar continued to be a key factor behind steep increases in output charges and cost burdens.

“While the PMI data still indicated a contraction in Egypt’s private sector in February, the headline index rose to its highest level in six months. New export orders were only marginally lower than in January, signalling improving external demand, and the rate of decline in output was slower last month,” said Tim Fox, head of research and chief economist at Emirates NBD.

Underlying the overall worsening in business conditions were further reductions in output and new work on subdued demand, challenging economic conditions and high inflationary pressures. New export business also declined in February, the twentieth successive month in which this has been the case.

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