RIYADH: Saudi Arabia’s non-oil private sector grew at its fastest pace in six months in August, with the Riyad Bank Purchasing Managers’ Index rising to 53.8 thanks to stronger business activity and domestic demand. According to the latest PMI survey, compiled by S&P Global, the headline index climbed from 53.1 in July, marking a fifth consecutive month of expansion and the strongest improvement in business conditions since February, although it remained below the survey’s long-run average of 56.8.  The upturn was led by output, which expanded at its strongest pace in seven months, while new orders rose for a fifth consecutive month. New export orders, however, declined at a faster rate amid regional tensions, according to the survey.  The PMI reading comes as Saudi Arabia’s non-oil economy continues to provide a measure of resilience amid a sharp downturn in oil activity. Flash estimates from the General Authority for Statistics showed real gross domestic product contracted 4.8 percent year on year in the second quarter of 2026, driven by a 24.7 percent plunge in oil activities, while non-oil activities expanded 0.6 percent despite a slowdown from earlier in the year.  Naif Al-Ghaith, chief economist at Riyad Bank, said the survey showed “that the non-oil economy is maintaining positive momentum through the third quarter.”   He added: “The improvement reflects a continued recovery in market activity, with output expanding at its strongest pace in seven months and moving closer to its long-run average.”  Output leads the upturn  Business activity rose as companies reported strengthening demand and an improvement in market conditions. Order books also improved, although some firms cited intense competition and excess supply as constraints on sales growth.  The survey showed backlogs of work falling for a third consecutive month, suggesting companies had sufficient capacity to handle incoming business.  Exports remain a weak spot  New export orders declined sharply and at a faster pace than in July, with respondents citing regional tensions as weighing on foreign demand.  The deterioration contrasted with improving domestic order books, leaving exports as one of the weaker components of an otherwise stronger PMI report.  “Domestic demand remains an important driver of growth, and continues to provide a solid foundation for businesses. Also, it reinforces the importance of domestic investment and consumption in sustaining near-term non-oil growth,” said Al-Ghaith.   At the same time, he added that firms appear to have “sufficient capacity to respond to stronger demand without creating significant operational bottlenecks.”  Hiring continues, price pressures persist  Employment expanded for a second consecutive month, although the pace of job creation remained modest by historical standards. Supply conditions also improved, with companies sourcing more inputs locally, while purchasing activity rose at its fastest pace since February.  Cost pressures stayed elevated, with material and transportation costs cited as the main drivers, though staff costs rose at their strongest pace since February. Output charges increased at their slowest rate since March as competition limited firms’ ability to pass on costs.   Business confidence for the year ahead rebounded to a seven-month high, with a fifth of firms forecasting increased activity over the next 12 months against just 2 percent expecting a downturn.  “Looking ahead, the improvement in business expectations provides a constructive signal for the remainder of the year. Continued fiscal support and the pipeline of development projects remain important anchors for private sector activity, while stronger confidence is translated into investment and hiring,” said Al-Ghaith.