Saudi Arabia PMI: Record low new business growth registered in the non-oil private sector
Source: Emirates NBD , Author: Posted by BI-ME staff
Posted: Thu March 8, 2018 10:48 am

SAUDI ARABIA. February data signalled a further muted improvement in business conditions in Saudi Arabia’s non-oil private sector, partly driven by further subdued output growth.

Moreover, new orders grew at the slowest pace on record, whilst foreign demand contracted. Firms reduced selling prices at a unprecedented rate in an attempt to stimulate client demand. Despite muted overall growth, sentiment towards future growth prospects reached a 46-month high.

The survey, sponsored by Emirates NBD and produced by IHS Markit, contains original data collected from a monthly survey of business conditions in the Saudi private sector.

Commenting on the Saudi Arabia PMI® survey, Khatija Haque, Head of MENA Research at Emirates NBD, said: “While the pace of expansion in Saudi Arabia’s non-oil sector was slow by historical standards in February, firms were much more upbeat about prospects for the coming year, citing new project wins and stronger growth prospects.  However, demand remained softer than in Q4 2017, prompting firms to cut selling prices last month by the most since the survey began in August 2009.”   

Key Findings                                                                                                             

- Headline PMI at 53.2 in February, little-changed from January’s 53.0

- New order growth slips to record low

- Unprecedented reduction in selling prices

At 53.2 in February, little-changed from 53.0 in January, the headline seasonally adjusted 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 – was at its joint-second lowest reading since the survey’s inception in August 2009. That said, the figure remained above the critical 50.0 no-change mark and thereby signalled an overall improvement in business conditions in the non-oil private sector.

After falling to a record low in the preceding survey, output growth ticked up during February. That said, the rate of expansion was the second-slowest registered in the survey’s history.

Inflows of new business expanded at the slowest pace in the survey’s history in February. According to anecdotal evidence, a reduction in demand from both domestic and foreign markets led to softening new business growth. Reflecting the deterioration in foreign demand, new export orders slipped into decline. The contraction ended a six-month sequence of growth.

Selling prices across Saudi Arabia’s non-oil private sector dropped at a record rate during February. According to anecdotal evidence, companies reduced output charges to stimulate client demand. The rate of reduction was moderate overall and the first registered since September last year.

Input price inflation softened to a three-month low during February’s survey period, falling below the long-run average. That said, average cost burdens faced by Saudi Arabian non-oil private sector firms continued to rise at a marked pace overall. Survey data indicated that both purchase prices and staff wages contributed to inflation.

Job creation in Saudi Arabia’s non-oil private sector continued during February, thereby extending the current sequence of growth to 47 months. The latest expansion was modest overall, albeit above the average registered over the past two years.

Despite easing demand for Saudi Arabian-produced goods and services, firms remained confident towards future growth prospects in February. The overall level of positivity reached its highest since April 2014. According to anecdotal evidence, an expected economic upturn and new project wins underpinned positive sentiment.

Photo: For illustrative purposes only

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. IHS 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 2017, total assets were AED 470.4 Billion, (equivalent to approx. USD 128 Billion). The Group has a significant retail banking franchise in the UAE and is a key participant in the global digital banking industry, with over 90 per cent of all financial transactions and requests conducted outside of its branches. The bank was declared the Most Innovative Financial Services Organization of the Year at the 2017 BAI Global Innovation Awards.

The bank currently has 230 branches and 1040 ATMs and SDMs in the UAE and overseas and a large social media following, being the only bank in the Middle East ranked among the top 20 in the ‘Power 100 Social Media Rankings’, compiled by The Financial Brand. 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, India, Singapore, the United Kingdom and representative offices in China and Indonesia.

The Group is an active participant and supporter of the UAE’s main development and community initiatives, in close alignment with the UAE government’s strategies, including financial literacy and advocacy for inclusion of People with Disabilities under its #Together Limitless platform. Emirates NBD Group is an official premier partner of EXPO 2020.

 For more information, please visit:

About IHS Markit
IHS Markit (Nasdaq: INFO) is a world leader in critical information, analytics and expertise to forge solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 key business and government customers, including 85 percent of the Fortune Global 500 and the world’s leading financial institutions.  Headquartered in London, IHS Markit is committed to sustainable, profitable growth.

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