Saudi Arabia PMI rises in July

The Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI) rose to 55.7 in July, the highest reading in three months.  Output and new orders both increased at a faster rate in July compared with June, and firms cited stronger underlying demand and higher construction activity as factors supporting rising output and new work.  The rise in new orders is particularly encouraging given that new export orders declined marginally last month. 

Firms increased hiring in July, although the rate of jobs growth remains modest overall with this index at 51.2.  Higher output and new orders contributed to firms increasing their purchasing activity, and pre-production inventories rose at a faster rate last month as well. 

Producer cost pressures increased in July, with the input price index rising to 53.4 – a three month high.  The increase was largely due to higher costs of raw materials and other inputs, as staff costs rose more modestly.  However, firms did not pass on rising production costs to buyers – output (selling) prices were only slightly higher on average in July with this index at 50.7.  Firms surveyed cited “intense competitive conditions” as reasons for absorbing higher costs in their margins.

Overall, the July PMI data is encouraging as it suggests that the non-oil sector is growing in Saudi Arabia, even as oil production has declined year-to-date.  Businesses surveyed were more optimistic about the outlook for the coming twelve months than they were in June, with the future output index rising to 59.6 last month.    

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