SABB/HSBC PMI Index: Strongest Improvement In Operating Conditions Since September 2012

SABB/HSBC PMI Index: Strongest Improvement In Operating Conditions Since September 2012

The Saudi British Bank “SABB” has published the results of the headline SABB HSBC Saudi Arabia Purchasing Managers’ Index (PMI) for July 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.

The monthly-adjusted headline PMI posted 60.1 in July, up from 59.2 in June, which indicates a sustained expansion of the Saudi Arabian non-oil private sector. The pace of growth was the quickest since September 2012 and reflective of a sharp improvement in operating conditions.

As was the case last month, solid output and new order growth helped drive the headline PMI upwards. Output increased at the steepest rate since February 2012, with new orders rising at the fastest pace in ten months. Meanwhile, new business from abroad also increased sharply.

Firms commented on increased numbers of new projects and good market conditions as the primary factors behind strong demand levels within the economy. Firms sought to increase output in order to meet this burgeoning demand, however, the level of outstanding business continued to accumulate during the month. The rate at which backlogs accumulated was quick in light of historical data.

As a result of growing evidence of capacity constraints at their units, firms in the Saudi Arabian non-oil private sector continued to increase their workforce numbers during July. The pace of job creation eased slightly since the previous month, and remained moderate overall.

According to anecdotal evidence, expected output growth was one of the reasons for companies to raise their purchasing activity during the month. That said, the pace of increase slowed slightly when compared to the previous month. In line with the increase in purchasing activity, pre-production inventory growth eased slightly but remained solid overall.

Despite strong demand levels, suppliers’ delivery times improved fractionally during the month, albeit at the slowest pace in the current three-year sequence of improvement. Companies reported that faster delivery times had been agreed with suppliers in order to meet higher business requirements.

Overall input costs increased at the fastest pace in seven months during July, driven mostly by a sharp increase in purchase prices. Meanwhile, wages continued to rise at a moderate pace. Study participants commented on higher levels of demand and rising raw material costs as the primary factors fuelling the increase in purchase prices.

As a result, firms increased their selling prices for the second month in succession as they sought to protect their margins from higher input costs.

Originally published on  www.cpifinancial.net