oil private sector business activity climbed to its highest level to date on a record output increase, sharp rise in new orders and robust employment, a purchasing managers' survey showed Monday. The SABB HSBC Saudi Arabia Purchasing Managers' Index (PMI), which measures the performance of the country's manufacturing and services sectors, rose to 62.2 points from October's 59.9, its highest level since the series began in August 2009. “They are very strong readings,” said Simon Williams, chief economist for Mena at HSBC Bank in Dubai. “The current output numbers are exceptionally strong and what is particularly encouraging is that the reading for new orders is strengthening as well which suggests that the pick up in output is likely to continue,” he said. The seasonally adjusted index is holding well above the 50 point mark that separates growth from contraction. The private sector of the world's top oil exporter saw output levels reach a series record of 71.8 points in November, after 68.7 the previous month. New orders in the top Arab economy grew at its fastest rate in five months, rising to 68.1. The survey of more than 400 private companies also showed that Saudi employment increased in November at the sharpest rate since June as firms hired extra staff to help with new orders. Saudi unemployment stands at around 10 percent and the government is trying to spur private sector growth and create more jobs for its growing population of over 18 million locals. Purchasing and wage costs continued to rise, although at a slower pace than in October, the survey said, signaling that inflation could continue to rise. Consumer inflation in the desert kingdom, at 5.8 percent in October, remains a worry. It came down from an 18-month peak of 6.1 percent in August but is still the highest in the Gulf. “I think it is likely that inflationary pressures are going to build but the data suggests we are at a fairly early stage in the price growth cycle,” Williams said. Meanwhile, Saudi money supply growth fell to 3.7 percent on the year in October from 5.1 percent in September, and the central bank's foreign assets increased 10.4 percent on the year, data from the Saudi Arabian Monetary Agency, showed Monday. M3, the broadest measure of money supply, came in at SR1.041 trillion ($277.6 billion) in October, up from SR1.004 trillion in the same month a year ago, and down from SR1.051 trillion in September, according to data posted on SAMA's website. SAMA's net foreign assets rose to SR1.610 trillion in October from SR1.582 trillion in September and SR1.459 trillion in October 2009, the data showed. Saudi Arabia has drawn on its reserves to fund record budgets and keep its $400 billion, five-year infrastructure development program on track. While this spending helped the Kingdom's economy grow last year, banks have remained hesitant to extend credit. Lending to the private sector edged up to SR777.9 billion in October from SR773.2 billion in the month earlier and SR747.2 billion in October 2009. During the boom years, bank claims on the private sector tripled between 2003 and 2008.
