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Non-oil business activity in the Kingdom accelerated in June, driven by expansions in new client demand and a surge in hiring, according to the Riyad Bank Saudi Arabia PMI (pdf). The seasonally adjusted headline figure rose to a three-month high of 57.2 in June, up from 55.8 in May, slightly above its long-run average of 56.9
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New orders rose at the fastest pace in four months: The rate of new business growth rose to 64.3 in June from 62.5 in May, a significant improvement compared to a 58.6 low in April, Reuters reported. Firms attributed the improvement to the acquisition of new clients, enhanced marketing, and better demand conditions, with the upturn primarily driven by domestic sales.
Output levels saw softer growth, however: While demand drove another expansion of output at the end of the second quarter, the pace of activity growth eased slightly to a ten-month low, according to Riyad Bank.
Employment levels surged: The Kingdom saw staffing levels increase to the highest level since mid-2011, marking the fastest pace of employment growth in over 14 years. The growth came as “companies actively expanded their frontline and skilled teams to meet higher workloads,” Riyad Bank Chief Economist Naif Al Ghaith said.
Purchasing activity grew at its fastest rate in two years, in response to rising input needs to fulfill new orders. Nearly 40% of survey respondents increased their purchases.
Cost pressures pushed up selling prices: The surge in hiring contributed to the highest increase in wage costs on record, in a bid to retail talent. This — along with rising material prices — led to companies raising their selling prices, reversing the declines seen in May and “signalling an improved ability to pass on higher costs to customers,” Al Ghaith said.
Strong optimism for the year ahead: Confidence about future activity climbed to a two-year peak, supported by healthy order pipelines, robust demand, and stronger domestic economic conditions. “On the future outlook, sentiment among non-oil businesses remains highly positive,” Al Ghaith said.
