Saudi Arabia’s non-oil private sector activity witnessed remarkable growth in March, driven by lower prices and improved economic conditions. A recent survey revealed, however, that the pace of growth has moderated from January’s near 14-year high. The seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers’ Index (PMI) decreased to 58.1 in March, down from 58.4 in February. Despite this slight decline, it remains well above the 50 threshold, indicating ongoing expansion, Reuters reported.
The new orders subindex fell to 63.2 in March, compared to February’s impressive 65.4 reading. This decline suggests a slowdown in momentum; nonetheless, businesses are actively stockpiling in anticipation of continued sales growth.
Employment growth reflects sales momentum
Employment growth in the sector was fueled by increased sales volumes and initiatives aimed at enhancing capacity. According to the survey data, this marks the best quarter for job creation in over 12 years.
Government initiatives boost economic conditions
Naif Al-Ghaith, Riyad Bank’s chief economist, highlighted that improved business conditions are driven by government measures to refine regulatory frameworks and invest in infrastructure. These actions are paving the way for greater domestic and foreign investment.
Saudi Arabia’s Vision 2030 initiative, which seeks to diversify the economy beyond hydrocarbons, targets an increase in the non-oil sector’s contribution to GDP to 65 percent by 2030. Currently, this contribution stands at over 50 percent.
Input cost inflation shows signs of easing
In March, input cost inflation dropped to a four-year low, encouraging companies to lower selling prices for the first time in six months, amidst fierce market competition.
Work backlogs surged sharply, recording the fastest increase since August 2018, attributed to higher order volumes and limited capacity.
Despite these positive indicators, the survey revealed a noticeable softening in business activity expectations for the upcoming year across the non-oil economy.
