Saudi Arabia’s non-oil private sector continued to expand in July, driven by improving domestic demand and ongoing growth in output, despite continued pressure on exports and a slowdown in the pace of new business growth. The data suggest that the non-oil economy remains resilient as the effects of recent regional disruptions continue to fade. According to the Purchasing Managers’ Index (PMI) survey released on Tuesday by Riyad Bank in partnership with S&P Global, the headline PMI edged down to 53.1 in July from 53.3 in June. However, it remained above the 50-point threshold that separates expansion from contraction, confirming that private-sector activity continued to grow for the 24th consecutive month, albeit at a slightly slower pace than in the previous month. The report noted that economic activity was primarily supported by stronger domestic demand, which helped boost both output and new orders. Markets have also begun gradually returning to normal following the geopolitical tensions that affected the region in recent months. Naif Al-Ghaith, Chief Economist at Riyad Bank, said the survey results indicate that domestic demand is continuing to recover gradually as market conditions normalize after the recent regional disruptions, supporting further increases in both output and new business. He added that this improvement reflects the ability of Saudi Arabia’s non-oil economy to maintain its momentum despite ongoing external challenges affecting international trade flows. Exports, however, remained the weakest aspect of private-sector performance. Export orders declined for the fifth consecutive month, weighed down by higher shipping costs and competitive pressures in overseas markets. Nevertheless, the rate of decline was the slowest since the current downturn began, potentially signaling the start of a gradual recovery in foreign demand. In the labor market, companies reported a modest increase in employment after a period of stagnation in June. However, the pace of job creation remained significantly below the strong levels recorded earlier in the year. On the cost front, the survey showed that the rate of increase in input costs slowed to its weakest level in four months, although costs remained relatively elevated. At the same time, labor costs recorded their fastest increase in five months, reflecting ongoing wage pressures and competition for skilled talent. Business confidence also weakened compared with the high level recorded in June, which had been the strongest in five months. Even so, companies continue to expect growth over the next 12 months, supported by domestic spending, investment projects, and economic diversification programs that are driving activity in the non-oil sector. The PMI’s continued position above the 50-point mark comes at a time when many major economies around the world are experiencing varying degrees of economic slowdown. This underscores the resilience of Saudi Arabia’s non-oil economy and its ability to benefit from strong domestic demand and government-led projects, despite ongoing challenges related to global trade and rising transportation and shipping costs.
