RIYADH: Saudi Arabia’s non-oil economy exhibited improved growth, with business activity accelerating at the fastest rate in five months, as indicated by an economic tracker.
The Kingdom’s Purchasing Managers’ Index rose to 57.2 in February, marking a notable improvement from a two-year low in January. This uptick signals a significant improvement in the operating conditions of the non-oil private sector, according to the Riyad Bank Saudi Arabia PMI report by S&P Global.
The firm’s chief economist Naif Al-Ghaith attributed the rebound of the PMI in February to robust growth in output and new orders, particularly driven by the services and construction sectors.
“The upturn reflected the continued thriving of non-oil activities in the Kingdom which recorded a 4.6 percent increase according to GASTAT (General Authority for Statistics) flash estimates. The survey results also signalled expectations of a modest recovery in demand this year driven by the acceleration of Vision 2030 projects,” he added.
The report also noted that this reading is the highest since September 2023, attributed to an improvement in client demand and indications of increased tourism activity.
New export orders also exhibited a modest rebound, a trend credited by Al-Ghaith to the rising demand for domestic products in international markets and the high competitiveness of local industries. This suggests potential expansion in production and employment opportunities, according to the economist.
While new work inflows accelerated compared to January, with reports indicating stronger market conditions and an increase in new clients, some firms mentioned that heightened competition had a dampening effect on sales growth.
The report also highlighted a surge in employment, growing at the fastest pace in eight years, which led companies to make a solid cut to their outstanding work.
This growth is attributed to the increase in new business and the positive outlook of firms regarding future demand. This optimism has also led firms to secure a steady flow of inputs at discounted prices from suppliers, resulting in inventory levels reaching the highest point since August 2022, as per the report.
In terms of input price inflation, the recent survey by S&P Global indicated a slight easing in February. Costs continued to rise significantly overall, albeit at the slowest pace since July of last year.
Selling prices rose marginally as some firms passed on higher costs to customers, while others lowered fees due to increased competition. This resulted in prices lagging behind cost increases, putting pressure on margins, the report added.
