Saudi Arabia's non-oil economy grows with output at 10-month high

Saudi Arabia’s non-oil economy accelerated in November, with output at a 10-month high, according to the latest purchasing managers’ index (PMI) report.

IHS Markit’s Saudi Arabia PMI release on Thursday said the growth was driven by a steep rise in sales and strengthening business confidence as the impact of coronavirus continued to ease.

Input purchasing rose, while employment returned to growth for the first time since January. Meanwhile, input cost inflation quickened, leading to a stronger increase in average output charges.

The headline seasonally-adjusted PMI picked up sharply from 51.0 in October to 54.7 in November, to signal the strongest improvement in business conditions since January. The index has now registered above the 50.0 no-change mark for three months in a row, highlighting a sustained recovery after the economic downturn due to Covid-19.

That said, the headline index remained below its long-run average, as was the case for key sub-components including output, new orders and employment. This suggested that, despite signs of a rebound in the non-oil private sector, there remains a notable gap between current and pre-Covid growth momentum.

Non-oil private sector output expanded at the fastest rate in 10 months during November, as panelists highlighted an improvement in market conditions and a steeper increase in new work. Both domestic and foreign sales rose on the month, marking only the second upturn in new export orders since February.

“A third successive rise in the Saudi Arabia PMI pointed to an economy getting back on its feet in November. Supported by output and new business growth reaching 10-month highs, the data suggests a strong end to the year for the non-oil private sector,” IHS Markit economist David Owen said in the report.

“Notably, employment started to rise, while business confidence strengthened in the wake of encouraging vaccine news and sharper demand growth. As a result, there was evidence of firms raising investment in anticipation of an uplift in 2021 should the pandemic come to an end.”

Business confidence towards the year ahead also improved notably in November, rising to the highest seen for 10 months. In particular, firms were encouraged by easing lockdown measures and news about effective vaccines. Consequently, there were reports of higher private sector investment and concerted efforts to raise inventories.

In addition, hiring activity turned positive for the first time since January, albeit only fractionally overall. A number of companies linked increased employment to rising demand, despite a further modest drop in outstanding work. Moreover, the overall rate of inflation was the second-fastest since October 2014.

Egypt confidence slides to record low

Meanwhile, Egypt’s non-oil economy made further progress in recovering output and new business in November. However, this came against a backdrop of business confidence hitting an historic low, as worries grew over a second wave of coronavirus in some global markets.

The headline seasonally-adjusted IHS Markit Egypt PMI posted above the 50.0 no-change mark for the third month in a row at 50.9 in November.

Export volumes were up in November, although the pace of growth softened from the previous month. The slowdown came as some European markets entered into stricter lockdowns to combat a second wave of Covid-19 cases.

This event led to increased worries among Egyptian firms that virus infections could rise in the future and potentially hamper the economic recovery. As a result, confidence regarding business activity over the next year fell to its weakest in the series history, with just 12 per cent of panelists expecting growth.

— business@khaleejtimes.com

• Saudi Arabia