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Saudi non-oil activities boom in November despite price pressures

Saudi non-oil activities boom in November despite price pressures
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Riyadh – Mubasher: The headline seasonally adjusted Purchasing Managers’ Index (PMI) of Saudi Arabia dropped to 57.5 in November 2023 from 58.4 in October this year.

The lower reading was attributed to moderations in the rate of staff and inventory growth, as well as a sharp reduction in delivery times, according to Riyad Bank’s latest data.

However, the PMI highlighted a rapid expansion in the non-oil private sector during November although price pressures accelerated to their highest in nearly one-and-a-half years.

New order intakes continued to rise, with firms witnessing improvements in market conditions, customer numbers, and investment spending.

Meanwhile, non-oil companies recorded a marked increase in business activity last month, which was slightly faster than in October.

The rapid expansion resulted in strong purchasing growth, which is one of the fastest in over eight years. Accordingly, input stocks increased again at a softer rate.

Output levels widened in November due to the remarkable upturn in sales, while the rate of job creation was solid, yet lower than October's nine-year high.

As for the outlook, business expectations for the coming 12 months improved notably in November, registering the highest level of confidence since June.

Naif Al Ghaith, Chief Economist at Riyad Bank, said: “Firms anticipate a continuous increase in output, fuelled by a robust inflow of new projects. Manufacturers, in particular, are highly optimistic about the next 12 months, as they anticipate a favourable business climate.”

“Additionally, the wholesale and retail sectors also show promising signs, aligning with the overall positive sentiment. This bodes well for Saudi Arabia's economic growth and suggests a favourable environment for businesses in various industries,” Al Ghaith continued.

“Despite the expansion in new orders and output, the new export figures have remained relatively low to be in line with the non-oil export figures posted by GASTA. This weak performance in exports can be primarily attributed to the petrochemical sector as this sector represents more than 29% of non-oil exports."

“Another factor affecting the PMI is the response of prices to input costs. Over the past few months, input prices have been increasing, and this trend has started to impact the price of final goods and services,” he underlined.

The official explained: “However, due to competitive pressures, the impact on overall prices has been somewhat subdued. This month, output prices recorded an increase, yet one that was slower than the increase in input prices.”