Saudi Arabia Business Optimism Index – Q3 2010 Presented by Dun & Bradstreet South Asia Middle...
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![Page 1: Saudi Arabia Business Optimism Index – Q3 2010 Presented by Dun & Bradstreet South Asia Middle East Ltd. (D&B) National Commercial Bank (NCB)](https://reader036.fdocuments.us/reader036/viewer/2022070403/56649f2c5503460f94c477c8/html5/thumbnails/1.jpg)
Saudi Arabia Business Optimism Index – Q3 2010
Presented by Presented by Dun & Bradstreet South Asia Middle East Ltd. (D&B)Dun & Bradstreet South Asia Middle East Ltd. (D&B)National Commercial Bank (NCB)National Commercial Bank (NCB)
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• The D&B Business Optimism Index is recognized world over as an
indicator which ascertains the pulse of the business community
• Provides insight into the short-term outlook of business units on
key business parameters including sales, profits, pricing,
headcount and investment
• Provides analysis of major trends and issues concerning the
business community
Business Optimism Index
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Survey
• Sample of business units representing Saudi Arabia’s economy is
selected
• 500 business owners and senior executives across business units are
surveyed
• The Q3 survey was conducted during June 2010
• Respondents are questioned about their expectations on relevant
business parameters
• Survey also captures respondent feedback on current business
conditions
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Composite Business Optimism Index
• The Composite Index is calculated separately for the hydrocarbon and non hydrocarbon sector
• To provide further analysis of the non hydrocarbon sector Composite Indices are calculated for each of the five economic subsectors
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World Economic Outlook
Real GDP Growth Global composite manufacturing & services PMI
Source: JP Morgan and markit economics
• Global economy expected to grow 4.6% in 2010, up from April forecast of 4.2%
• The US economy registered growth of 2.7% in Q1 2010 as against a revised GDP growth
rate of 5.6% in Q4 2009. 2010 growth revised upward to 3.3%
• The global composite PMI showed expansion (i.e. scoring > 50) for the eleventh
consecutive month
Source: IMF forecast, Q1 figures are actuals
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Economy of Saudi Arabia
• Saudi Arabia’s growth for 2010 is projected at 3.7% (0.1% in 2009); led by government spending amid high oil revenues
• After witnessing a drop in 2009, SAMA’s foreign assets are forecast to grow
Source: IMF Source: IMF
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Composite Business Optimism Indices
• Non hydrocarbon sector outlook declines amid weak Selling Price and Sales Volume expectations
• Hydrocarbon sector outlook improves on expectations of higher Selling Price
Hydrocarbon sectorNon-hydrocarbon sector
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Business Optimism Indices Trends : Non Hydrocarbon Sector
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Manufacturing Sector
• The Global Manufacturing Purchasing Managers’ Index has shown growth for
twelve consecutive months
• Saudi manufacturing sector optimism declines on weak selling price outlook
• Demand levels are expected to remain unchanged as compared to last quarter
Global Manufacturing Purchasing Managers’ Index
Source: JP Morgan and markit economics
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Construction Sector
• The global construction sector is witnessing a gradual upturn; sector is
evolving as emerging markets continue to drive global economic recovery
• Saudi’s construction sector optimism declines as BOI for Volume of Sales slides
42 points, New Orders outlook still remains robust
• Recent selloff in international commodities market has presumably taken BOI
for Selling Price down 27 points
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Trade & hospitality Sector
• Retail sector growth in developed countries likely to remain slow whereas
emerging markets are expected to witness rising sales in 2010
• Outlook for Saudi trade & hospitality sector declines on weak Selling Price
outlook, BOI is down 33 points to 10
• BOI for Sales Volume and New Orders register only a marginal decline
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Transport & Communications Sector
• Global transportation sector showing strong signs of revival amid recovery in
trade sector and increased passenger traffic
• Saudi transport & communications sector optimism declines on weak demand
outlook as BOI for Sales Volume and New Orders has fallen 27 and 13 points
respectively
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Finance, Insurance, Real Estate & Business Services Sector
• The Global Services PMI for the month of May stands at 56.3, showing
expansion for the eleventh month in a row
• Saudi service sector optimism declines on a 20 point fall registered in BOI for
Sales Volume and a 22 point drop in New Orders parameter
Global Services Purchasing Managers’ Index
Source: JP Morgan and markit economics
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Business Optimism Indices Trends : Hydrocarbon Sector
• Oil prices fell by 20% to USD 67 from their early May peak of USD 84 on concerns of Euro
Zone debt crisis, but have risen since then to average USD 73 in June
• Saudi’s hydrocarbon sector optimism has improved significantly in the third quarter
primarily due to a higher BOI score for Level of Selling Prices
• Last quarter’s dip in BOI for Level of Selling Prices for the hydrocarbon sector is validated
by the decline witnessed in oil prices during May
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Other Key Highlights
•Raw material costs is the leading concern for non hydrocarbon segment, 44% of the respondents have cited it as a factor which might affect their business •Availability of finance is a concern for 32% of the business units in non hydrocarbon sector
•40% of companies in the non hydrocarbon sector intend to investment in business expansion
•For 44% of the companies in the hydrocarbon sector project delays could be a major factor which might impact their business in the third quarter
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Conclusion
• Business outlook mixed in Saudi Arabia amid concerns of anemic global economic recovery
• Non hydrocarbon sector optimism drops on lower BOI for Sales Volume and Selling Price
• The Manufacturing sector, in contrast to the other 4 non-hydrocarbon sectors, expects demand to stay robust as the BOI for both Sales Volume and New Orders remain relatively unchanged
• Hydrocarbon sector displays surge in optimism levels on the back of expectations of rise in level of Selling Prices
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