Saudi Arabia witnessed a strong business performance in July, despite the high cost of capital and intense competitive pressures, according to the Riyad Bank Purchasing Managers' Index (PMI).
In July, the index recorded its lowest reading since December 2022 at 57.7 points, down from 59.6 points in June, the bank announced in a statement.
According to the index, any PMI readings above the 50-mark show growth, and the latest reading was slightly above the long-run survey average (56.9) and signaled underlying solid business conditions, despite the slowdown since June.
The data signaled another strong performance for the non-oil private sector as favorable domestic economic conditions underpinned a sharp upturn in business activity.
Overall growth lost momentum since June, mainly reflecting the slowest rise in new work for seven months and a slightly weaker pace of job creation.
Weaker new order growth was the main factor holding back the headline PMI in July.
Although still sharp, the rate of new business expansion eased considerably after reaching its highest level for over eight years in June.
Moreover, the latest rise in new work was the slowest in seven months.
Survey respondents often commented on intense competitive pressures and subsequent price discounting to stimulate sales.
Output levels were supported by efforts to catch up on unfinished work in July. It was signaled by a reduction in outstanding business for the fourteenth consecutive month.
The rate of backlog depletion was only marginal and the slowest since April.
Chief Economist at Riyad Bank Naif al-Ghaith said the effects from tighter monetary conditions have started to be mildly felt across the Kingdome's private sector in July after a solid first-half performance.
Ghaith noted that the slowdown in business activity was expected due to business cycle dynamics and ongoing market repricing adjustments.
"Furthermore, the rising cost of capital and intense competitive pressures are among the factors holding back new business expansion," he added.
Saudi Arabia's economy grew by 1.1 percent in the second quarter annually, slower than 3.8 percent in the first three months.
However, the Kingdom maintained a 5.5 percent growth in its non-oil economy in the first two quarters of this year, according to rapid estimates by the General Authority for Statistics.