Business activity in Saudi Arabia rises to 6-month high in March, PMI data shows

Saudi Arabia's non-oil private sector showed strong improvement at the end of the first quarter of 2024, with business activity expanding significantly to its highest level in six months. The seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers' Index (PMI) indicated a notable increase in both order volumes and new customer numbers. This growth in Saudi Arabia's business activity drove increased purchasing and a new round of employee recruitment. Furthermore, price pressures have eased, particularly in terms of wages.

Saudi Arabia's overall PMI slightly decreased to 57.0 in March from 57.2 in February. However, it remains well above the 50.0 threshold, indicating healthy operating conditions in the non-oil private sector. This index suggests that the sector's expansion is continuing, rather than contracting.

The Saudi Arabian PMI showed that the output levels of non-oil businesses expanded to their strongest level in six months in March. Most companies attributed the increased activity to strong order volumes and demand growth. Additionally, new orders for Saudi Arabian non-oil businesses increased substantially for the second consecutive month. Demand from foreign clients also improved, with the latest data marking the first sustained monthly growth since mid-2023.

Naif Al-Ghaith, Chief Economist at Riyad Bank, stated, "The strong performance across various sectors, coupled with a significant increase in order volumes and new customers, indicates a resilient market that is poised for growth."

Saudi Arabia's non-oil companies anticipate that demand conditions will continue to support business activity. The outlook for the next 12 months is positive, reaching its strongest level since last November. Consequently, recruitment activity in Saudi Arabia has increased to support the growing workload. Furthermore, Saudi Arabian non-oil companies reported an increase in purchasing activity, with input purchase rates rising month-on-month. Due to strong demand, Saudi companies are maintaining additional inventory by purchasing more goods and requesting faster deliveries, which has improved delivery times and stock levels.

Al-Ghaith added, "The increase in business activity and growth in demand have led to a significant acceleration in purchasing growth, reflecting a dynamic market that is responding to growing consumer demand."

Cost inflation in Saudi Arabia's non-oil private sector has decreased for the second consecutive month. Although input prices rose overall, the inflation rate was the lowest in eight months. This is primarily due to weakening wage pressures, with businesses reporting only a slight increase in employee costs. Meanwhile, purchasing cost inflation remained solid, although it has decreased to a six-month low. Consequently, average selling prices in Saudi Arabia rose slightly in March. This increase is also likely due to strong demand, which has allowed Saudi Arabian businesses to raise prices.