JEDDAH – Business activity in Saudi Arabia's non-oil private sector rose slightly in August to 58.3 points from 58.1 points in July, on increasing new business, the SABB HSBC Saudi Arabia Purchasing Managers' Index (PMI) report said Monday. The Index measures activity in the manufacturing and services sectors. The seasonally adjusted index remains well above the 50-point mark separating growth from contraction. New order growth increased in August to 68.66 points from 66.27 in July. "A number of firms commented on improved market conditions and greater efforts made by sales teams," the survey said. But employment growth slowed in August, to its slowest pace in five months. Output growth stayed strong but also slowed. Growth of overall input prices climbed to 56.64 points from 55.75, while output price growth fell sharply to 48.48 from 51.59, recording the first sub-50 level since data collection started over three years ago - potentially indicating downward pressure on corporate profit growth. The survey said competitive pressures had prompted some firms to lower their selling prices, but noted that the overall decrease was marginal with 84 percent of companies charging the same prices as they did in the previous month. Behind the slight uptick in the headline number was a more marked increase in incoming new business, which anecdotal evidence attributed to a range of factors including greater sales and marketing efforts and improving market conditions. In addition, a number of firms also linked higher intakes of new work to increased construction activity. New work from foreign clients also increased during August, though the rate of growth was at a 21-month low, the bank said in a statement. Output levels at Saudi Arabia non-oil private sector businesses increased markedly in August. Unlike the trend in new orders, however, growth of activity was the weakest since last October. Job creation also eased slightly, with overall employment levels rising at the slowest pace for five months. Backlogs of work at Saudi non-oil private sector companies accumulated for the tenth time in the past 11 months in August, after falling marginally during the previous survey period. The increase was solid compared to the historical series trend and generally associated by respondents with greater intakes of new business. With workloads increasing on the month, purchasing activity among Saudi non-oil private sector companies continued to rise. The pace of expansion was broadly unchanged from that registered in July, and sufficient for a further (albeit weaker) increase in stocks of purchases. Many firms that built pre-production inventories noted expectations for growth in activity over the coming months. Despite input buying increasing, suppliers' delivery times shortened again during August. Competition among vendors and faster payments were reportedly behind the improvement in performance, which was of a similar magnitude to that registered one-month previously. August data showed that prices charged by businesses operating in Saudi Arabia's non-oil private sector economy decreased for the first time in over three years of data collection. Although only slight, the reduction in selling prices contrasted with a further rise in average costs. Overall input price inflation was slightly stronger than July's seven-month low, and underpinned by growth of both purchasing and staff costs. The former rose relatively quicker over the month, with the costs of a range of raw materials pushed higher by stronger demand. – SG
