June 2012

The Saudi British Bank “SABB” has published the results of the headline SABB HSBC Saudi Arabia Purchasing Managers’ Index™ (PMI™) for April 2012 – a monthly report issued by the bank and HSBC. It reflects the economic performance of Saudi Arabian non-oil producing private sector companies through the monitoring of a number of variables, including output, orders, prices, stocks and employment.

Demand for Saudi Arabian private sector goods and services remained strong in May, with new orders rising at the fastest rate for almost a year. Output and employment levels were increased over the month as a result, though rates of growth in each case were slightly slower than in April. Inevitably, cost pressures remained strong as demand pressures filtered through into both the materials and labour markets.

Saudi Arabia’s non-oil private sector economy continued to expand at a robust pace during May. This was highlighted by the headline PMI posting at 60.4, unchanged since April’s nine-month high and above the historical series trend.

May saw new business placed at Saudi Arabian non-oil private sector firms increase at a marked and accelerated rate – the fastest in 11 months. Data showed that, while international sales continued to increase, the domestic market remained the predominant factor driving growth.

In line with a rise in new orders, KSA non-oil private sector companies expanded production levels and recruited additional staff during May. In both cases, however, growth was slightly weaker than during the previous survey period. Anecdotal evidence suggested that job creation, in number cases, also reflected expectations of increasing workloads in the coming months.

Despite a rise in staffing capacities, backlogs of work increased for the eighth month in a row during May. The rate of growth was broadly unchanged since April, and faster than the series average.

Slowing only slightly on April’s series-record high, cost inflation facing Saudi Arabian non-oil private sector firms remained sharp in May. Both purchase prices and staff costs increased over the month, the former again at the faster rate. Inputs reported to be up in price included food, oil and steel.

With demand remaining strong, KSA non-oil private sector firms were able to pass on at least part of the burden of higher costs to clients. Charge inflation rose to the strongest for 11 months.

Further highlighting expectations for growth in the near term, businesses stepped up their purchasing activity and accumulated stocks of inputs at the sharpest rate for a year. Despite this, competition among vendors ensured that their delivery performance improved, with lead times shortening for a tenth successive month in May.