Saudi Arabia’s non-oil private sector continued to expand in October, with business activity and output growth accelerating despite a decline in the Riyad Bank Purchasing Managers’ Index (PMI) to 54.0 from 55.3 in September, according to data compiled by S&P Global.
The seasonally adjusted index remained above the neutral 50-point threshold for the seventh consecutive month, signaling continued improvement in operating conditions. Although it eased from September’s seven-month high, October’s reading was the second-highest since February.
Output growth accelerated to a strong pace from the previous month, supported by improving underlying demand and increased sales and marketing efforts. New orders also continued to rise, although more slowly than in September and at a rate below the survey’s historical average.
Domestic demand remained the main driver of growth, while export orders declined for the eighth consecutive month, with the contraction accelerating.
Survey respondents cited shipping disruptions, higher transport and insurance costs, and competitive market conditions as factors weighing on overseas sales. About a quarter of firms reported a decline in export orders in October.
Employment increased for the fourth consecutive month, although hiring remained modest and slowed from September. Backlogs of work rose slightly for the second straight month, reflecting higher sales and some delays in supplier deliveries.
Supplier delivery times improved only marginally, marking the weakest improvement since April, as disruptions to maritime routes continued to affect shipments. Some businesses consequently increased their reliance on domestic suppliers to secure production inputs.
Cost pressures intensify
Cost pressures mounted at the start of the final quarter, with purchase prices rising at their fastest pace in six months, driven by higher shipping, insurance, raw material and energy costs. Staff cost inflation also reached its highest level since February.
Despite rising input costs, the rate of increase in selling prices slowed to a nine-month low as companies offered larger discounts amid intensifying competition. Nevertheless, selling prices continued to rise at a strong pace.
Commenting on the findings, Naif Al-Ghaith, chief economist at Riyad Bank, said the non-oil private sector demonstrated resilience in October, supported by sustained domestic demand, stronger business activity and continued employment growth.
He noted that the PMI’s position above the 50-point threshold indicated improving operating conditions despite its decline from the previous month.
Al-Ghaith explained that faster output growth reflected Saudi businesses’ ability to respond to domestic demand through operational efficiency, marketing initiatives and increased sales activity.
New orders maintained strong growth, although demand had become more selective, he added.
Continued hiring, inventory accumulation and purchasing activity reflected companies’ readiness to meet demand, while expectations for output over the coming year remained only mildly positive and below the survey’s historical average.
