Business activity in the non-oil private sector economies of Saudi Arabia and the UAE remained strong in August, with output and numbers of new orders increasing.
The reading for Saudi Arabia, the Arab world's largest economy, on the Riyad Bank purchasing managers' index softened to 56.6 in August, from 57.7 in July, but was well above the neutral 50-point mark that separates growth from contraction.
The uplift in activity was strong overall, with companies surveyed reporting higher new orders and market growth. Surveyed firms linked a rise in sales to stronger customer demand and greater investment.
“The kingdom’s non-oil activities have managed to expand despite the continuous challenges arising from input prices and the high interest rates,” said Naif Al-Ghaith, chief economist at Riyad Bank.
“The non-oil economy has not displayed much of the tighter monetary policy symptoms. This has been overcome by the continuing reforms and projects … under Vision 2030.”
The Vision 2030 programme, which seeks to diversify the kingdom's economy and reduce its dependence on oil, has attracted and continues to attract foreign businesses to Saudi Arabia, Mr Al-Gaith said.
The initiate serves as a catalyst for increasing competition and improving services, he said.
Employment levels in the kingdom's non-oil economy picked up last month from July as sustained new business growth contributed to hiring, according to the panellists surveyed. Greater hiring and output helped businesses to reduce their outstanding work levels.
Business activity in the UAE’s non-oil private sector also strengthened last month, with the year-ahead sentiment among those surveyed reaching its highest level since March 2020, as output rose sharply and businesses registered their most rapid reduction in delivery times in more than four years.
The seasonally adjusted S&P Global purchasing managers’ index reading of the Arab world's second-largest economy softened to 55 in August, from 56 in July.
“Strong demand conditions across the non-oil economy gave companies greater confidence about the path for future activity,” said David Owen, senior economist at S&P Global Market Intelligence.
The survey's Future Output Index showed that business sentiment was at its highest level since the beginning of the coronavirus pandemic in 2020, having improved in seven of the eight months in 2023 to-date.
“The findings suggest that the outlook for the non-oil sector is highly positive, with firms signalling that this was supported by rising new order inflows, greater tourism and increased investment,” said Mr Owen.
More than a quarter of survey respondents reported a rise in output since the previous month, with most attributing that to rising new business volumes.
Strong economic growth supported a rise in new orders, higher customer numbers, and greater household spending, according to the panellists.
Robust domestic sales were recorded alongside a solid rise in new export business, which was the fastest seen in just over a year.
The UAE's economy grew by 3.8 per cent on an annual basis in the first quarter of this year, boosted by its strong non-oil sector extending the momentum of its 7.9 per cent expansion in 2022, its biggest in nearly 11 years.
The UAE's Brics membership will also help the country to pursue its annual growth target of 7 per cent or more and double the size of its economy by 2031, Abdullah bin Touq, the Minister of Economy, said last month.
Businesses surveyed in the latest PMI survey cited a marked shortening of supplier lead times in August, as vendors often responded positively to requests for faster deliveries. The improvement was the strongest recorded since July 2019.
Employment levels expanded in the latest survey period at a modest degree.
In Egypt, headline index for the non-oil private sector economy was unchanged at 49.2 for the second consecutive month, its highest since August 2021.
Output and new orders in the Arab world's third largest economy fell at modest rates, while employment and inventories moved into expansion territory, the survey found.
“The findings suggest that the sector has somewhat stabilised in recent months after a prolonged period of contraction,” Mr Owen said.
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