Despite falling to a six-month low, the rate of output growth across the non-oil sector remained substantial in February
Saudi Arabia’s businesses continued to see elevated demand and a robust rise in output in February, which further strengthened the labor market and led to the sharpest increase in wage costs in the PMI survey’s history.
Business conditions continued to improve despite Saudi Arabia’s PMI edging lower in February, signalling the softest improvement in non-oil business conditions for nine months.
The PMI dipped to 56.1 in February from 56.3 in January, indicating a slightly weaker improvement in operating conditions across the domestic non-oil private sector economy. The PMI has been on a gradual downward path since reaching one of its highest levels in over a decade last October.
“Despite the moderation in momentum, the sector remains firmly in growth territory, supported by seven months of rising international sales and an improving volume of new orders,” said Naif Al-Ghaith PhD, Chief Economist at Riyad Bank.
In February, Saudi Arabia’s business conditions remained strong overall, with the index well above its 50.0 neutral threshold. Sub-indices measuring output and new order volumes also pointed to a healthy business environment.
Despite falling to a six-month low, the rate of output growth across the non-oil sector remained substantial in February. Survey respondents frequently commented on improvements in customer demand and in new project approvals. However, some reports indicated that competitive pressures across markets had weighed on growth.
Order books across Saudi Arabia’s business environment expanded in February, which firms broadly linked to rising domestic sales. Panellist comments suggested that supportive government policies, improved customer spending, increased sales and marketing efforts, digital business development and collaborative projects with clients had all boosted new work volumes. Companies also saw an improvement in international orders, although the rate of expansion eased.
“February’s results point to an economy that remains strong but is moving onto a more sustainable balance. Growth has moderated, yet demand and hiring activity continue to anchor the expansion. The broader trend remains positive, with businesses actively adjusting their capacity while maintaining a high degree of confidence in underlying market conditions,” added Al-Ghaith.
“This balanced approach to inventory and staffing suggests the private sector is well-positioned to navigate evolving economic dynamics throughout the remainder of the year,” he added.
Read: Egypt’s non-oil private sector shows resilience in February as PMI hits 48.9
In line with recent trends, the PMI data continued to signal a robust increase in staff numbers across Saudi Arabia’s non-oil private sector. In fact, the rate of employment growth rose to a four-month high and was among the strongest recorded in the series. Surveyed businesses remarked on increased sales volumes and a continued build-up of outstanding orders as drivers of hiring.
“A key highlight of the February results was the sizeable increase in employment, as firms expanded their workforce to manage higher workloads and new business inflows. This acceleration in hiring signals confidence in near-term demand, even as overall output growth moderated. At the same time, supply chain performance improved further, with delivery times shortening amid better coordination and operational efficiencies,” added Al-Ghaith.
Businesses in Saudi Arabia also highlighted the awarding of higher salaries to retain staff in February, contributing to a marked increase in wage pressures. In fact, the rate of staff cost inflation rose to its highest since the survey began in August 2009. With wage costs accelerating, business selling charges rose steeply in February. The uplift was the joint-fastest since May 2023, matching the level seen last October.
Finally, business expectations for the next 12 months remained positive. Firms anticipating output growth linked this to new client projects, stronger demand and improving domestic economic conditions.
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