Saudi Arabia’s non-oil private sector firms witnessed strong activity in November despite experiencing the fastest rise in input costs in over four years. Business activity expanded at the sharpest pace since July 2023, helped by an increase in new orders, purchasing activity and staff recruitment.
The headline seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers’ Index (PMI) rose from 56.9 in October to 59 in November, marking the fourth consecutive month in which the headline index has risen. The latest reading signaled a notable improvement in operating conditions at non-oil firms. The rate of growth was the sharpest since mid-2023.
“This robust expansion, marked by accelerated output and demand, reflects the increasing capacity of non-oil sectors to contribute to economic activity independently of oil price fluctuations,” stated Naif Al-Ghaith PhD, chief economist at Riyad Bank.
New order inflows rise
Saudi Arabia’s non-oil activity rose due to higher activity in all of the index’s five sub-components in November. Business activity rose at the sharpest pace in 16 months, which firms closely linked to a faster upturn in new order inflows compared to October. Firms also cited stronger demand conditions, higher customer numbers, greater investment spending and positive client reactions to marketing campaigns. Businesses also saw an increase in foreign sales following a modest decline in the previous month.
“The acceleration in purchasing activity and inventory expansion suggests businesses are gearing up for continued growth in demand, a reflection of the kingdom’s steady progress in broadening its economic base,” added Al-Ghaith.Job creation surges
Saudi Arabia’s non-oil private sector firms also witnessed an improvement in sales last month which led to a rise in recruitment. In fact, the rate of employment growth was the second-quickest in just over ten years. The rise in job creation reflected a need for stronger workforces, according to qualitative reports. This helped firms to keep up with workloads and led to another marginal cut in outstanding business.
“Additionally, employment growth indicates a rising capacity of non-oil sectors to absorb labor, further supporting socioeconomic objectives like increasing national employment,” he added.
Stronger input buying stretches supply chains
Inventory volumes were another area of growth in November. Non-oil firms across Saudi Arabia bought inputs at the fastest pace since March, with many indicating a desire to boost stocks in the event that sales volumes increase.
Companies also stayed confident that demand volumes would continue to rise, which supported a positive outlook for business activity in 12 months’ time. However, stronger input buying stretched supply chains in November, leading to the slowest improvement in vendor performance in 15 months.
“This performance aligns with broader economic trends showing Saudi Arabia’s ability to attract foreign investments, boost consumer confidence, and enhance trade partnerships across the country. Despite global economic uncertainties, the kingdom’s non-oil sector appears well-positioned to maintain its upward trajectory,” added Al-Ghaith.
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Wider geopolitical tensions raise price pressures
Although sharper purchasing growth and greater hiring efforts supported Saudi Arabia’s non-oil economy during November, they also generated additional inflationary pressures. Wages saw a particularly marked rise, reporting the fastest pace of pay inflation in just over ten years. Purchase prices also increased to a sharper extent, with firms citing the impact of wider geopolitical tensions on material prices and higher transport costs. Subsequently, average prices charged rose for the second month straight, with the rate of increase being the sharpest this year.
“The strong November performance underscores the effectiveness of policies aimed at fostering a competitive, diversified economy. Moving forward, maintaining this momentum will be essential to achieving Vision 2030 goals and ensuring long-term economic growth,” he concluded.
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