RIYADH: Saudi Arabia’s non-oil private sector continued its strong growth in February, driven by strong customer demand, increased hiring, and a positive economic outlook.
According to the latest Riyad Bank Purchasing Managers’ Index report, the score stood at 58.4, reflecting sustained increases in business activity despite a slight dip from January’s decade-high reading of 60.5.
The Kingdom’s PMI drop comes as Kuwait’s index slowed to 51.6 with job cuts, while Egypt’s fragile recovery saw a slight decline to 50.1, marking its second month above the neutral level of 50.
“Rising domestic and international demand, along with continued improvements in supply chains, suggest that business activity will maintain its positive momentum in 2025,” said Naif Al-Ghaith, chief economist at Riyad Bank.
The PMI measures non-oil sector health using key factors. A score above 50 signals growth, and below 50 indicates decline. Although there was a slight decline in February, business conditions stayed robust, supported by consistent new orders and growing exports.
Companies across various industries reported flexible demand conditions, with 35 percent of surveyed firms experiencing an increase in new business orders, compared to just 5 percent reporting a decrease.
Additionally, new export orders rose sharply, reflecting strong international demand for Saudi non-oil goods and services. Some firms also underlined that promotional pricing strategies helped attract new customers.
Employment surges to 16-month high
A key highlight of the February PMI report was the significant rise in employment. The hiring rate reached its highest level in 16 months as businesses expanded their workforce to meet rising workloads. This increase in staffing was particularly strong in the manufacturing and services sectors, where firms sought to enhance their operational capacity.
Al-Ghaith emphasized the positive momentum in the labor market, saying: “The surge in employment levels reflects business confidence in future demand. Companies are expanding their teams to meet growing workloads, indicating optimism about continued economic growth.”
Strong demand supports business growth
The non-oil sector’s growth was fueled by solid domestic demand and increased tourism activity, contributing to stronger sales and production levels.
Companies also attributed their expansion to intensified marketing efforts and a larger customer base. While the pace of growth in new business slowed slightly compared to January’s peak, it remained one of the strongest since mid-2023.
Government initiatives and economic diversification efforts under Saudi Vision 2030 have played a critical role in driving non-oil sector performance. Businesses reported that policy support and infrastructure investments have created new opportunities for growth.
Cost pressures and pricing strategies
Despite the strong business conditions, firms faced persistent cost pressures in February. The report indicated that input prices remained high due to rising wages and increased raw material costs. However, the rate of inflation eased to its lowest level in four months, providing some relief to businesses.
To offset cost increases, many companies implemented modest price hikes for their products and services. Competitive market conditions, however, kept these price increases in check, as firms aimed to balance profitability with maintaining strong customer demand.
Outlook for 2025
Looking ahead, Saudi businesses remain highly optimistic about future growth prospects. The level of confidence among firms reached its highest point since November 2023, with many expecting further expansion in the coming months.
This optimism is largely driven by anticipated economic growth, increased investment opportunities, and improving supply chain efficiencies.
