Riyadh, the capital of Saudi Arabia. Image Credit: Agencies

Dubai: Saudi Arabia Purchasing Managers’ Index (PMI) rose to a 14-month high of 56.6 in February, up from 56.2 in January. This brought the headline index closer to its long-run average of 57.6 since August 2009.

The upturn in business conditions seen in February led by a steep and accelerated increase in new business — the sharpest since August 2015.

Export sales were down on the month, indicating that the main impetus continued to come from the domestic market.

An increased demand in turn resulted in higher overall output in February, with the rate of growth accelerating for the second month in a row to its highest since last November.

February also saw a stronger increase in purchasing activity as firms looked to bring their buying levels in line with higher output requirements and build up inventories.

Businesses that raised their stocks also commented on an expected uplift in activity in the coming months. Confidence towards the outlook remained among the highest seen over the past five years, albeit with the degree of optimism easing slightly from January’s recent peak.

“The February PMI reading is still below the series average of 57.6, indicating that non-oil growth in the kingdom is still weaker than the long-run average,” Khatija Haque, Head of Mena Research at Emirates NBD, said. “The main driver for the improvement in February was a stronger rise in new orders, despite the second consecutive decline in new export orders. This suggests that it is domestic demand driving order growth.”

Despite relatively strong growth in output and new orders, employment in the private sector was broadly unchanged, with fewer than 1 per cent of firms surveyed reporting increased hiring levels.

On the downside, the latest data revealed that firms operating in Saudi Arabia’s non-oil economy remained reluctant to take on additional staff. Employment rose only fractionally and at the slowest rate in almost five years in February.