Saudi Non-Oil Private Sector Grows for 24th Month on Strong Domestic Demand

Saudi Arabia's non-oil private sector demonstrated continued resilience in July, expanding for the 24th consecutive month. The sector's growth was primarily fueled by robust domestic demand, which offset ongoing pressures on exports and a slight slowdown in the pace of new business growth. This sustained expansion suggests the non-oil economy is navigating regional disruptions effectively.

The Purchasing Managers' Index (PMI), a survey conducted by Riyad Bank in partnership with S&P Global, edged down to 53.1 in July from 53.3 in June. Despite this marginal decrease, the index remained firmly above the 50-point mark, which signifies a contraction, confirming ongoing expansion in private-sector activity.

“

The survey results indicate that domestic demand is continuing to recover gradually as market conditions normalize after the recent regional disruptions, supporting further increases in both output and new business.

Economic activity was significantly bolstered by stronger domestic demand, leading to increases in both output and new orders. Markets are also gradually normalizing following recent geopolitical tensions in the region. Naif Al-Ghaith, Chief Economist at Riyad Bank, noted that this recovery in domestic demand reflects the non-oil economy's ability to maintain momentum despite external challenges impacting international trade.

However, exports remained a weak point, with export orders declining for the fifth month in a row. This downturn was attributed to increased shipping costs and competitive pressures in international markets. Despite this, the rate of decline has slowed, potentially indicating an upcoming recovery in foreign demand. The labor market saw a modest increase in employment, though job creation pace remains below earlier highs. Input cost increases slowed, but labor costs rose faster due to wage pressures and competition for talent. Business confidence dipped slightly from June's high, but companies remain optimistic about future growth, driven by domestic spending and diversification programs.

“

This improvement reflects the ability of Saudi Arabia’s non-oil economy to maintain its momentum despite ongoing external challenges affecting international trade flows.