JEDDAH – Saudi Arabia's non-oil private sector expanded at a faster pace in September, helped by stronger growth in new business, data from HSBC and the Saudi British Bank (SABB) showed Wednesday. The seasonally adjusted headline SABB/HSBC Saudi Arabia Purchasing Managers' Index (PMI) for the month of September revealed that the Saudi non-oil producing sector continued to report strong growth of both business activity and new orders in the said month. The headline PMI rose to 60.3, up from 58.3 in August, to reach a four-month high. The average PMI reading through the third quarter of 2012 (58.9) was below the average for Q2, but nonetheless broadly in line with the survey trend. The PMI increase strongly suggests the economy will maintain momentum in the months ahead, HSBC said. Business activity rose at the fastest pace since April, underpinned by accelerated growth of incoming new work. Over 55 percent of the survey panel signaled an increase in total new business, reflecting reports of improved inflows from both domestic and export clients. After easing to a 21-month low in August, the rate of expansion in new export orders accelerated sharply to a seven-month peak, the report said. Strong growth of incoming new business exerted further pressure on capacity, with September seeing backlogs of work rise for the second straight month. The rate of increase was broadly similar to the prior month and above the average for the survey history. Improved operating conditions and rising levels of outstanding business encouraged companies to increase employment. Payroll numbers rose for the twelfth consecutive month, with the pace of jobs growth the sharpest since April. Moreover, the continued strengthening of the labor market exerted upward pressure on average wages and salaries, which rose solidly over the month. Higher payroll costs were also linked to recent contract negotiations and the rising cost of living. Average purchase prices also increased during the latest survey period. However, the rate of inflation slowed further and was the weakest for over two years. With payroll costs rising at a faster pace, and purchase price inflation easing, the rate of increase in overall costs was broadly similar to that signaled in August. Companies passed on part of the increase in costs to clients in the form of higher charges during September. Average output prices rose marginally, following a slight decrease in August. A number of firms reported that their pricing power was still being constrained by competitive pressures. Purchasing activity rose at the fastest pace for five months in September, leading to a further robust increase in inventory holdings. Over a third of surveyed companies reported higher levels of input buying during the latest survey period. Meanwhile, average vendor performance showed a further marked improvement, as surveyed companies benefited from successful negotiations and regular order placement. The gain “is particularly striking given weak September PMI scores for many other major emerging and developed markets,” Simon Williams and Liz Martins, Dubai-based HSBC economists, wrote in the report. “We expect this outperformance to persist.” A government plan to spend more than $500 billion has sparked record sales of Islamic debt and the fastest expansion in bank loans to private businesses and consumers since 2009. The Kingdom's benchmark stock index has gained 7.5 percent this year, after dropping 3.1 percent in 2011. – SG
