JEDDAH – Operating conditions in Saudi Arabia's non-oil producing private sector strengthened during May. The degree of improvement eased, however, and the headline index posted a six-month low of 57.3, down from April's 58.0, the latest Saudi British Bank (SABB)/HSBC Saudi Arabia Purchasing Managers' Index showed. Although strong, May data signaled a weaker expansion in output levels. Anecdotal evidence suggested that the weaker growth rate was driven by generally slow market conditions. Growth of new work also weakened during the latest survey period, but remained sharp overall, as half of respondents indicated increased order book volumes. Concurrently, new export business increased at a weaker rate. The solid rise in incoming new business was reflected in increased backlogs of work. Work-in-hand rose for a fourth successive month and at the fastest pace in the current sequence. Meanwhile, staffing levels continued to rise, as companies responded to higher workloads. The rate of job creation was up slightly from April, but modest overall. Vendor performance improved during the latest survey period, as quicker delivery times had been agreed with suppliers to help meet production requirements. Non-oil producing private sector companies in Saudi Arabia recorded increased overall input prices. The rate of increases in costs, however, eased and was the weakest in 30 months. While average staff costs rose at a slightly sharper rate than in April, the rate of purchase price increases was the second-lowest in the series history. Weaker demand accounted for much of the slowest. Private sector companies recorded unchanged output charges in May. The latest reading was only the second month of non-rising output prices in the series history and was partly driven by increased market competition. Purchasing activity continued to increase during May, as 3 percent of survey panelists indicated a rise in buying. Companies attributed the increase to more incoming new business. While the pace of expansion was solid, the latest reading was the weakest in nine months. Saudi Arabia's non-oil producing private sector firms indicated rising input stock levels in May. Stocks of purchases have increased throughout the survey history, but the latest pace of expansion was below the series average. – SG
