Composite Business Optimism Index for the hydrocarbon sector has improved Construction sector most optimisticJEDDAH: The business community in Saudi Arabia remains optimistic about the short-term business outlook, despite growing concerns on the growth of global economy in the coming months. The National Commercial Bank said in its Business Optimism Index report for the fourth quarter of 2010 that, among others, the hydrocarbon composite index at 51 and non-hydrocarbon index at 49 continue to be very good scores. “The hydrocarbon sector continues to be bullish on oil price outlook but, surprisingly, that is not seen translating into profit or employee growth. In general the non-hydrocarbon sector appears to be in “wait and watch” mode as they consider currently conflicting global economic indicators and look to them to coincide to give a firmer lead on where the economy is heading. The construction industry stands out as one sector where anticipated national demand for housing is boosting confidence,” Phil Strange, CFO of Dun and Bradstreet South Asia Middle East Ltd (D&B), partner of NCB in bringing out the report. The BOI survey revealed that the Saudi non-hydrocarbon sector is not expecting any improvement in demand levels in the fourth quarter as compared to the previous quarter as the BOI for the Volume of Sales has registered a value of 59 as compared to 55 in Q3, while the BOI for the new orders parameter has dropped to 56 from 60 in Q3. The outlook for level of selling prices has increased in line with the rising inflationary pressures in the Saudi economy. Inflation climbed for the seventh month to 6.1 percent in August on higher global food prices. The BOI for Level of Selling Prices stands at 37 in Q4, up from 23 in the last quarter. Optimism with respect to the net profits parameter has deteriorated as compared to Q3; the BOI for this parameter now stands at 52 as compared to 64 in the third quarter. Outlook regarding factors impacting business has changed in Q4 as compared to the previous quarter. Raw material costs remain the most important business concern in Q4; 57 percent of the non-hydrocarbon respondents have cited it as the key business factor which would impact their businesses. Availability of skilled labor has emerged as the second most important factor ahead of availability of finance suggesting that credit conditions are easing; 19 percent of the survey participants quoting skilled labor as their main concern. Thirty seven percent of the firms plan to invest in business expansion; this figure has decreased as compared to the previous quarter. Commenting on the findings of the survey, Dr. Said Al-Shaikh, senior vice president and chief economist of NCB, said: “With strong economic growth in emerging economies, particularly in Asia, continues to underpin the global economy, business sentiment in the Kingdom showed improved outlook in the non-hydrocarbon sector for the fourth quarter, yet the optimism index remained unchanged from the last quarter. Also, it is apparent that the improved credit conditions along with continued government investment in infrastructure to have positively influenced the level of construction activities, as demonstrated by the rise in the optimism index of the sector to 60 points.” In addition, consistent with recent inflation figures in the Kingdom, driven by rising food prices and rents, level of selling prices index has shown a reversal in the 4Q from the previous quarter.” There is considerable uncertainty about the sustainability of growth in three of the world's biggest markets: the US, Europe and Japan, the report noted.
