Although the PMI
continued to signal a strong improvement in Saudi Arabian nonoil private
sector business conditions in August, at 57.9 (down from 60.0 in July),
it was at its lowest level for one-and-a-half years. Behind the latest
fall in the headline index were deteriorations in all of its component
indices (the suppliers' delivery times index is inverted in the
calculation of the PMI). Activity levels increased at the slowest
rate in the series history in August as new order growth moderated. The
latest rise in new business was the least marked for almost a year.
Nevertheless, the index remained at a level indicative of a marked rate
of expansion. Panel members stated that higher new order takings were
the result of favorable market conditions, successful advertising and
company expansions. Backlogs continued to build during the latest
survey period as workloads increased. However, the rate of accumulation
remained only meager and close to June's recent low. Further growth
of new work led Saudi Arabia's nonoil private sector firms to take on
additional personnel and build up inventories in August. Both employment
and input stocks rose solidly on the month, albeit at slower rates.
Staffing increased at the weakest rate for 11 months, while input
holdings accumulated at the slowest pace in the series history.Following
a marginal deterioration in July, vendor performance improved slightly
during August. Respondents indicated that lead times shortened because
of a high degree of competition amongst suppliers. However, the vast
majority of monitored companies saw no change in average delivery times.Overall
input and output price pressures moderated in August to five- and
six-month lows respectively. The slowdown in the former reflected weaker
rises in both purchasing and staff costs. Purchase prices rose at
the mildest pace for nine months, although the rate of increase remained
above the series trend. Reports showed that higher raw material prices,
partly supported by demand, drove the latest round of inflation.Meanwhile, improved business performance was cited as the main reason for greater salaries and wages.Charges
were further raised during August in order to protect profit margins
from higher input costs. However, the rate of increase was slower than
in July.