Emirates NBD’s Saudi Arabia Purchasing Managers’ Index (PMI) rose slightly to 53.8 in October from 53.4 in September, as employment and new order growth picked up. New export orders also recovered after contracting in September, reflecting increased external demand.
The employment index rose to 51.3 in October from 50.7 in September, its highest level since March. Emirates NBD cautioned that this is yet to result in an increase in hiring, as only 3.1% of private sector firms surveyed said they’d hired more staff last month.
Staff costs remained below the neutral 50.0 level for the second month in a row, pointing to slight wage deflation in the private sector.
“Business optimism about future output increased markedly in October, with nearly half of all firms surveyed expecting their output to be higher in a year’s time, while the other half expected current levels of output to be sustained,” said Khatija Haque, Head of MENA Research, Emirates NBD. “Overall, we retain our 2% GDP growth forecast for Saudi Arabia in 2018.”
Oil rose to USD 80 a barrel last month, a likely contributor to improved business sentiment, and the government signalled increased budget spending in 2019 in its pre-budget statement.
The news that business confidence is up in Saudi Arabia comes on the back of a slowdown in the inflation rate. After a spike at the start of the year, when was VAT introduced, inflation fell back to a 2.2% annual rate in August.
Residents are businesses are also enjoying a year on year fall in residential and commercial rents.
The International Monetary Fund, in its most recent World Economic Outlook, projected economic growth in Saudi Arabia of 2.2% in 2018 and 2.4% in 2019.