Saudi Arabia's non-oil economy expands on higher output growth and orders

The Emirates NBD Purchasing Managers’ Index for Saudi Arabia climbed 0.2 points to 55.1 last month from July

Saudi Arabia’s capital, Riyadh. The kingdom's non-oil economy expanded marginally in August. Bloomberg

Saudi Arabia’s non-oil sector economy expanded marginally in August helped by an improvement in output and new orders, according to a new survey of companies.

The Emirates NBD Purchasing Managers’ Index for Saudi Arabia rose 0.2 points to 55.1 in August from the earlier month. Readings above the 50-mark indicate growth and below 50 signal contraction. The index is a composite indicator designed to give an overview of operating conditions in the non-oil private sector economy. The survey is sponsored by Dubai's biggest lender, Emirates NBD, and produced by IHS Market.

"The pace of non-oil private sector growth in the kingdom has accelerated in the last three months, relative to the first five months of the year, said Khatija Haque, head of Middle East and North Africa research at Emirates NBD. Output growth  and new work indices rose to 59.7 and 59.0 but both are below previous years' averages.

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The data indicated an uptick in output growth across the non-oil private sector, with many companies attributing higher activity to stronger inflows of new business. Despite improvement in August output being sharp overall, the rate of growth was below the historical average, according to the survey.

Continuing the current phase of improvement registered since May, new orders received by non-oil private sector companies in Saudi Arabia increased again last month. New export orders increased, albeit at only a marginal pace overall.

Reflecting stronger inflows of new business, companies reported a marked build-up in work backlog during the survey period, with some companies noting that output had been focused on ongoing projects while new orders were adding to the backlog of work.

“On the whole, firms surveyed were optimistic about their future output, with 17 per cent of firms expecting their output to be higher in a year’s time. However, this is a slightly lower percentage than in July,” Ms Haque said.

In response to higher output requirements, firms in the non-oil private sector upped their purchasing activity during August. The rate of growth was sharp overall and the strongest seen in 2018 so far, the survey said.