Saudi Arabia’s non-oil private sector demonstrated considerable expansion in July, albeit at a more moderate pace compared to the preceding month, as job creation surged in response to robust domestic demand, according to the Riyad Bank Purchasing Managers Index report released on Tuesday. The headline PMI reading decreased to 56.3 in July from 57.2 in June, yet it remained significantly above the 50.0 threshold that signifies growth in activity.
“Saudi Arabia’s non-oil economy remained on a solid growth track in July, supported by higher output, new business, and continued job creation,” Reuters reported, citing Naif Al-Ghaith, chief economist at Riyad Bank.
Companies hired additional staff to manage increased workloads and new orders. The survey highlighted another historically steep rise in employment, following June’s record growth in job numbers over the last 14 years. Output growth eased to its lowest rate since January 2022, as firms encountered challenges such as heightened competition and reduced customer footfall. Furthermore, new export orders declined for the first time in nine months, indicating difficulties in attracting foreign clients.
Cost pressures moderated slightly, with input price inflation decelerating from the second-quarter average. However, labour costs continued to rise sharply as companies offered bonuses to retain employees. Despite the deceleration, businesses remain optimistic about future activity, buoyed by resilient market conditions and strong client demand. Nevertheless, overall optimism was the lowest recorded since July 2024.
Positive outlook amid moderation
The PMI survey, compiled by Riyad Bank in collaboration with S&P Global, underscores ongoing challenges in the market, including heightened competition and a dip in foreign client acquisition, reflected in the first contraction in new export orders since October 2024. Despite these challenges, the inflationary pressures on input prices moderated slightly from earlier in the year, although labor costs increased notably due to retention bonuses. Sale prices also rose, aligning with higher input costs.
Saudi Arabia’s non-oil private sector growth aligns with the Kingdom’s Vision 2030 initiative aimed at diversifying the economy beyond oil dependence. Riyad Bank’s Chief Economist Naif Al-Ghaith stressed the positive outlook fueled by steady demand, project pipelines, and investment tied to Vision 2030 despite the recent moderation in business optimism.
Recent statistics from Riyad Bank’s PMI show that the non-oil private sector GDP in Saudi Arabia is expected to grow around 3.4 percent in 2025, slightly down from 4.2 percent in 2024, reflecting broader global economic uncertainties but sustained domestic demand. This growth trend is supported by robust hiring, with firms experiencing record employment increases across manufacturing, wholesale, and retail sectors.
