Saudi Non-Oil Economy Gains Ground Despite Geopolitical Pressures

Saudi Arabia's non-oil sector showed signs of improvement in September, as reflected by a nearly two-point rise in the Purchasing Manager’s Index (PMI). The Riyadh Bank PMI climbed to 55.3 from August’s 53.8, marking the strongest rate of improvement since February. This growth was primarily driven by a surge in new orders, despite a slight slowdown in output growth.

The recovery is largely credited to domestic demand, as foreign orders continued to decline for the seventh straight month. Companies cited supply chain disruptions, particularly in the Strait of Hormuz and the Bab al-Mandab Strait, as a major challenge. Delivery times showed only marginal improvement, and geopolitical tensions further dampened business sentiment, leading to a drop in confidence about future output.

Inflationary pressures were evident, with sharp increases in material and transport costs leading to higher selling prices. However, purchasing activity gained momentum, and employment opportunities strengthened as firms expanded their sales and technical teams. Naif Al-Ghaith, Chief Economist at Riyad Bank, noted that the increase in employment is tied to both current demand and businesses expanding their capacity.