Saudi Arabia’s PMI recorded 58.4 in February, down from its strongest reading in just over a decade of 60.5 in January
Business conditions in Saudi Arabia’s non-oil private sector strengthened noticeably in February, supported by robust growth in customer sales and activity. Improving market demand contributed to a sharp increase in employment levels as firms sought to expand their operating capacity and prepare for growth opportunities.
The headline seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers’ Index recorded 58.4 in February, down from its strongest reading in just over a decade of 60.5 in January. Business conditions in the non-oil private sector improved markedly in the last month but the drop in the index was mainly due to new business growth cooling from one of the fastest rates on record at the start of the year.
Manufacturing and services drive job growth
Stronger business conditions in Saudi Arabia’s non-oil private sector supported a particularly strong rise in employment in February. The latest survey data showed that the rate of job creation climbed to the second-highest in over a decade, outpaced only by October 2023. Job growth was strongest in manufacturing and services, sectors which also observed the highest levels of confidence.
“While the pace of new order growth eased compared to January’s recent peak, businesses remained confident about future demand. This was reflected in higher staffing levels, as companies expanded their workforce to meet increased workloads and business expectations,” stated Naif Al-Ghaith PhD, chief economist at Riyad Bank.
New export business rises sharply in February
Companies across Saudi Arabia’s non-oil private sector noted resilient demand conditions in February, with improvements in sales and new client acquisitions helping to boost output across the non-oil sector. Increased tourism and greater marketing efforts were also signaled to have supported growth. Although the expansion in output eased slightly, it was still among the sharpest since the middle of 2023.
In addition, non-oil sector firms in Saudi Arabia continued to highlight a robust increase in new order volumes, with 35 percent seeing sales improve in February. Higher demand was partly driven by international markets as new export business rose steeply, while some firms mentioned gaining customers through price promotions.
“Although export growth softened slightly from recent months, it remained above average, reinforcing the strength of the non-oil sector. Meanwhile, businesses continued increasing their purchases, but at a slower pace as many had already built-up inventories in previous months,” added Al-Ghaith.
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Pace of inflation eases to four-month low
Input price pressures remained steep in February, driven by higher material prices and wages, although the pace of inflation eased slightly to a four-month low. Higher costs translated into only a modest rise in selling prices amid competitive pressures.
Business expectations for the coming year rose to their highest level since November 2023. In many cases, firms anticipate that economic growth and government initiatives will support development and expansion opportunities, while several also pointed to a strong pipeline of future business.
“Saudi Arabia’s non-oil economy remains on a solid growth path, with ongoing expansion in employment, efficient supply chains, and strong domestic and export demand pointing to sustained economic momentum. While the PMI moderated slightly, the underlying indicators suggest that the private sector remains well-positioned for continued expansion, supported by a positive outlook for business activity and market conditions,” added Al-Ghaith.
