RIYADH: Saudi Arabia’s non-oil private sector maintained solid growth in July, with the Purchasing Managers’ Index standing at 53.1 supported by resilient output and new orders despite persistent regional headwinds.
The Riyad Bank Purchasing Managers’ Index, compiled by S&P Global, signaled a fourth consecutive monthly improvement in operating conditions as it remained comfortably above the neutral 50 threshold, with the figure just 0.2 points lower than June’s rating.
The survey adds to broader signs of resilience in the country’s non-oil economy despite heightened geopolitical uncertainty, with the International Monetary Fund expecting Saudi Arabia’s economy to grow by 1.7 percent in 2026 before accelerating to 5.5 percent in 2027.
Domestic demand, government spending and the continued implementation of Vision 2030 projects are set to support non-oil activity even as regional tensions weigh on confidence and trade.
“The latest survey suggests that domestic demand is gradually strengthening as market conditions normalize following recent regional disruptions, supporting sustained increases in both output and new orders,” Naif Al-Ghaith, chief economist at Riyad Bank, said.
Output up
Business activity also remained robust in July, with around 19 percent of surveyed firms reporting higher output, compared with just 4 percent reporting a decline, highlighting a broad-based improvement in operating conditions.
Al-Ghaith said: “External demand, however, continued to face headwinds. Export orders declined for the fifth consecutive month as elevated freight costs and regional tensions weighed on international trade, although the pace of contraction eased compared with previous months.
“Meanwhile, improving supplier performance and stronger local sourcing contributed to faster delivery times, highlighting the growing resilience of domestic supply chains despite ongoing logistical challenges.”
Despite the improvement in conditions, business confidence for the year ahead eased from June’s five-month high, with only 8 percent of surveyed firms expecting output to increase over the next 12 months as regional uncertainty continued to weigh on sentiment.
Cost pressures continue to ease
The chief economist further explained that cost pressures also showed signs of gradual easing and that input price inflation moderated to its slowest pace in four months as purchase price increases softened.
Firms passed part of these costs on to customers through higher selling prices, but the pace of output price inflation eased slightly from June, suggesting that inflationary pressures are becoming more manageable, he highlighted.
“The sustained expansion in domestic demand, resilient business activity and improving supply side conditions reinforce our expectation that Saudi Arabia’s non-oil economy will maintain solid growth momentum through the second half of the year, supported by strong underlying economic fundamentals and continued progress in economic diversification,” Al-Ghaith said.
