Saudi non-oil private sector has registered solid improvement in its business activity in May with companies reporting a surge in new export orders, said a report.

The Saudi Arabia purchasing managers’ index (PMI) compiled by Saudi British Bank (SABB) and HSBC hinted at sustained growth for the kingdom's non-oil private sector last month.

As has been the case throughout the PMI survey history to date, operating conditions in Saudi Arabia’s non-oil producing private sector strengthened during May. The degree of improvement eased, however, and the headline index posted a six-month low of 57.3, down from April’s 58, said the report.

The PMI reflects the economic performance of the Saudi non-oil producing private sector companies through the monitoring of a number of variables, including output, orders, prices, stocks and employment.

Although strong, the data for May signalled a weaker expansion in output levels. Anecdotal evidence suggested that the weaker growth rate was driven by generally slow market conditions.

Growth of new work also weakened during the latest survey period, but remained sharp overall, as half of respondents indicated increased order book volumes. Concurrently, new export business increased at a weaker rate, the report stated.

The solid rise in incoming new business was reflected in increased backlogs of work. Work-in-hand rose for a fourth successive month and at the fastest pace in the current sequence, it added.

Meanwhile, staffing levels continued to rise, as companies responded to higher workloads. The rate of job creation was up slightly from April, but modest overall, the HSBC report said.

Vendor performance improved during the latest survey period, as quicker delivery times had been agreed with suppliers to help meet production requirements.

According to the report, the non-oil producing private sector companies in Saudi recorded increased overall input prices. The rate of increases in costs, however, eased and was the weakest in 30 months.

While average staff costs rose at a slightly sharper rate than in April, the rate of purchase price increases was the second-lowest in the series history. Weaker demand accounted for much of the slower increase, according to survey panellists.

The majority of Saudi Arabian non-oil producing private sector companies recorded unchanged output charges in May. The latest reading was only the second month of non-rising output prices in the series history and was partly driven by increased market competition.

Purchasing activity continued to increase during May, as 30 per cent of survey panellists indicated a rise in buying, said the report.

Companies attributed the increase to more incoming new business. While the pace of expansion was solid, the latest reading was the weakest in nine months.

Saudi Arabia’s non-oil producing private sector firms indicated rising input stock levels in May. Stocks of purchases have increased throughout the survey history, but the latest pace of expansion was below the series average, it added.-TradeArabia News Service