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Saudi Arabian non-oil private sector expanding

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Staff writer ▼ | July 4, 2014
Saudi ArabiaThe Saudi British Bank ABB has published the results of the headline SABB HSBC Saudi Arabia Purchasing Managers' Index (PMI) for June 2014, a monthly report issued by the bank and HSBC.

It reflects the economic performance of Saudi Arabian non-oil producing private sector companies through monitoring a number of variables, including output, orders, prices, stocks and employment.

June data signalled the continued expansion of the Saudi Arabian non-oil private sector, with the seasonally adjusted headline PMI recording 59.2, up from 57.0 in May. This highlights a strong improvement in operating conditions and the highest since January.

The improvement in the headline PMI partly emanated from stronger growth in both output and new orders, while record-high buying activity was recorded. The pace of output growth quickened to a 26-month high. New business from abroad also improved, albeit at a slower pace than total new orders. Companies sought to meet rising demand by ramping up output.

Firms also recorded a further increase in backlogs of work as new business rose sharply. However, the rate of accumulation was slower than in the previous month and was moderate overall. In response to growing signs of capacity constraints at their units, Saudi Arabian non-oil private sector firms increased their workforce numbers for a third successive month. The net rise in employment was solid overall, with the latest increase the fastest in the current sequence of job creation.

Panellists signalled strong levels of optimism for growth by continuing to increase their purchasing activity during June In spite of strong demand for inputs, average delivery times continued to improve. Better vendor performance was encouraged by a competitive market that required shorter delivery times.

Overall input costs in Saudi Arabia's non-oil private sector continued to rise in June, and at a faster pace than in the previous three months. Staff cost increases were marginal, with purchase prices the driving force behind the rise in overall input costs. Panellists linked higher purchasing costs to a strong level of demand present in the economy.

In response to increased cost inflation, companies raised their selling prices, albeit marginally, during June. The pace of expansion was fractional overall, with the vast majority of the panel reporting no change from the previous month.

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