Dubai: Saudi Arabia’s non-oil private sector showed a strong improvement at the start of the year, driven by a surge in new orders and a subsequent rebound in both output and employment.

Businesses also reported stronger optimism towards the outlook for activity in 2019. Elsewhere, a drop in firms’ operating expenses, linked to falling purchasing costs, supported the continuation of the recent sequence of output price discounting which extended to a third straight month.

“The headline Emirates NBD PMI for Saudi Arabia rose to its highest level in more than a year in January. The main driver was an acceleration in new order growth, which appears to have been domestically driven, as export orders remained broadly flat month-on-month,” said Khatija Haque, Head of Mena Research at Emirates NBD.

Some of the growth in new orders was likely due to price discounting: output prices fell by the most since February 2018. Firms were able to reduce selling prices as their purchasing costs also declined in January

The headline Purchasing Managers’ Index (PMI) climbed to 56.2 in January, from 54.5 in December, its highest reading for 13 months. The rise in the index reflected not only stronger growth in output, new orders and employment, but also a recovery in the rate of expansion in stocks of purchases.

The main positive takeaway in January was an acceleration in the rate of new order growth to the quickest since December 2017. The upturn owed almost exclusively to stronger domestic sales, with inflows of new business from abroad remaining broadly unchanged from the previous month.

Businesses continued to use discounts as way to support sales at the start of the year. Growth in purchasing activity recovered slightly from December’s record low, though was still relatively subdued by historical standards.

Business confidence towards growth prospects over the next 12 months improved for the second month in a row to reach the highest since December 2013.

Egypt’s PMI contracts

Egypt’s non-oil private sector economy recorded a further contraction in output in January, as ongoing declines in new orders and employment hampered business activity.

January data showed that purchasing activity growth picked up to the quickest rate in 12 months, as firms sought to benefit from cooling input cost inflation. The weakest rise in cost burdens in the survey history in turn contributed to the first fall in output prices for three years.

Egypt’s PMI fell from 49.6 in December to 48.5 in January, signalling a fifth successive deterioration in business conditions. The latest reading was the lowest in 13 months, but above the series average.

Egyptian firms reduced output moderately in January, reflecting declines in overall and foreign new orders. The contraction in output was the fastest seen since December 2017. Employment declined marginally in January, indicating the fourth month in a row in which jobs at Egyptian firms have decreased.