RIYADH: Growth in Saudi Arabia’s non-oil private sector rose to a five-month high in August, buoyed by the impact of increasing oil production, a survey of businesses showed on Thursday. The seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers’ Index climbed to 58.7 points last month from 57.7 in July.
The 50-point level separates expansion from contraction. Saudi Arabia has raised its oil output to record highs in the last few months to protect its market share, although global oil prices plunged to six-year lows in August. Khatija Haque, head of regional research at Emirates NBD, said the oil price slide since June did not seem to be hurting non-oil business activity in the country, while higher oil production had apparently boosted activity in related manufacturing sectors that were included in the PMI survey. “We expect Saudi Arabia to maintain high levels of oil output regardless of the price, which should continue to underpin activity in the non-oil sectors through the rest of this year,” she said.
Output growth in the PMI survey accelerated to 65.8 points in August from 65.1 in July, while new order growth picked up to 64.8 from 63.1. Employment growth rose sharply to 53.3 points. Output prices fell for the first time in four months, with the index hitting 49.7 points, while input price inflation was positive but slowed. Meanwhile, business activity growth in the United Arab Emirates’ non-oil private sector accelerated in August to a sixmonth high, a corporate survey showed on Thursday. The seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index, which covers manufacturing and services, rose to 57.1 points last month from 55.8 in July.
A level above 50 indicates expansion. “The sharp rise in the UAE PMI in August confirms our view that Ramadan likely contributed to the softer readings in June and July,” said Khatija Haque, head of regional research at Emirates NBD. The Muslim holy month of Ramadan, when some business traditionally slows, fell in June and July this year. Output growth surged to 63.1 points in August from 60.0 in July, while new orders rose to 61.3 from 60.2. Growth in new export orders, however, slowed sharply to 54.4 points. “Encouragingly, new orders and output growth readings remain high, suggesting strong domestic demand. Slower growth in export orders last month may reflect the impact of currency appreciation relative to other emerging markets,” Haque said.
The UAE dirham is pegged to the US dollar, which has been strong. Employment growth slowed slightly but remained positive. Output prices fell for the second month in a row, with the index at 49.2 points, but input price inflation was positive and picked up slightly. In another report, Business activity in Egypt’s private sector excluding oil grew in August at the fastest pace of 2015 on the back of solid growth in output, though employment fell for the eighth time in nine months, a survey showed on Thursday. The Emirates NBD Egypt Purchasing Managers’ Index rose to 51.2 in August, up from 49.2 the previous month. A reading above 50 indicates expansion and below 50, contraction.
“The improvement in the August survey is encouraging, and more than reverses the decline seen in the previous month,” Jean-Paul Pigat, economist at Emirates NBD, said. “The rise in the output component to an 11-month high was particularly notable, and hopefully suggests that the slowdown witnessed in July will not persist through H2.” The August survey was the highest reading in eight months and the second time this year that business conditions recorded by the survey have improved, albeit modestly. Much of the improvement was spurred by an increase in output and new orders, with 23 percent of participants recording higher output than the month before and many reporting stronger demand conditions.
“With export activity softening, domestic demand is likely to be the main driver of growth in the near term,” said Pigat. Egyptian non-oil exports during the first seven months of the year fell by 19 percent compared to the same period last year, the state’s General Organization for Export and Import Control said in July. New work from abroad decreased in August for the third time in four months. Some participants tied lower exports to a lack of stability across key international markets in the Middle East.
