Saudi Arabiaโs non-oil private sector recorded robust improvement by the end of 2024โs first quarter with business activity expanding sharply to the greatest extent for six months. The seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managersโ Index (PMI) highlighted a strong increase in order books and new customers. This increase in Saudi Arabiaโs business activity led to an increase in purchasing growth and another round of staff hiring. Moreover, price pressures declined, especially on wages.
Saudi Arabiaโs headline PMI saw a slight decline from 57.2 in February to 57.0 in March. However, it remained well above the 50.0 mark which separates expansion from contraction, indicating strength in operating conditions in the non-oil private sector economy.
Non-oil business expansion
Saudi Arabiaโs PMI revealed an expansion in output levels of non-oil businesses during March to the strongest levels in six months. Most companies are linking higher activity to robust order intakes and stronger demand. Moreover, new orders at non-oil businesses in Saudi Arabia saw a sharp increase for the second month in a row. Demand from foreign customers also improved, with the latest data marking the first sustained month-on-month growth since mid-2023.
โThe strong performance witnessed across various sectors, coupled with the notable increase in order books and new customers, signifies a resilient market poised for growth,โ stated Naif Al Ghaith, chief economist at Riyad Bank.
Strong demand propels employment
Non-oil companies in Saudi Arabia expect demand conditions to continue supporting business activity. Forecasts for the next 12 months were positive, recording the strongest levels since last November. Consequently, Saudi Arabia saw an increase in hiring activity to support the growing workload.
Moreover, non-oil firms in Saudi Arabia reported an increase in purchasing efforts as the rate of input buying grew month-on-month. Due to strong demand, Saudi firms kept additional stock by purchasing more items and requesting quicker deliveries. This improved both lead times and inventories.
โThe heightened business activity and increased demand resulted in a notable escalation in purchasing growth, reflecting a dynamic marketplace responding to growing consumer needs,โ added Al Ghaith.
Read: Saudi Arabiaโs unemployment rate declines to 4.4 percent in Q4 2023
Cost inflation
Saudi Arabiaโs non-oil private sector saw a decline in cost inflation for the second month in a row. Although input prices
increased overall, the rate of inflation was the slowest in eight months. This was primarily due to weakening wage pressures with firms reporting only a slight increase in staff costs.
Meanwhile, purchasing cost inflation was solid, despite slipping to its lowest in six months. Therefore, Saudi Arabiaโs average selling price slightly increased in March. This increase could also be due to stronger demand which allowed businesses in Saudi Arabia to raise prices.
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