In June 2023, the seasonally adjusted Purchasing Managers’ Index (PMI) of Saudi Arabia indicated significant growth in the non-oil private sector. According to the latest data from Riyad Bank, the PMI reading rose to 59.6 from 58.5 in May 2023.
During this period, both output and new orders experienced rapid expansion, reaching multi-year record rates. Companies substantially increased their purchasing activity to meet the increased business demands and strengthen their inventory, marking the fastest pace in the survey’s history.
The reports pointed out that in June 2023, the output in Saudi Arabia experienced the most significant increase since March 2015, and sales growth reached its highest level in nearly nine years. Companies throughout the Kingdom took measures to strengthen their inventory in anticipation of the expected increase in the upcoming months, leading to a ten-month high in the rate of inventory accumulation.
Job growth remained steady, and certain firms offered higher wages to retain experienced employees. Employment levels saw the most substantial increase since August 2015, fueled by a positive outlook, which reached its highest level since January.
According to Naif Al Ghaith, the Chief Economist at Riyad Bank, the non-oil private sector in the Kingdom experienced a robust growth trajectory by the end of the second quarter. This growth was driven by increased inflows of new businesses, particularly in construction and tourism activities.
Al Ghaith also mentioned that all other index components showed positive trends. The heightened demand and improved market conditions led to a notable rise in employment growth, reaching its highest level since August 2015, and increased purchasing activities.
However, he also expressed concerns about potential inflationary pressures from this economic spike, citing reported increased staff and construction material costs. Despite this, supply chains managed to cope well with the higher demand, as lead times improved at the sharpest rate in 13 years. This improvement helped to limit further increases in prices charged to customers.
Looking ahead, there is still a strong positive sentiment regarding economic activity. The recent surge in demand and sales has boosted confidence across industries, and these positive trends are expected to continue in the coming months.
The Kingdom’s non-oil private sector has shown impressive growth, driven by increased demand, improved market conditions, and favorable industry sentiments. However, there are concerns about potential inflationary pressures, and businesses remain cautiously optimistic about the future, expecting the positive trends to continue in the near term.