Arab News, Tue, Jun 04, 2024 | Dhu al-Qadah 27, 1445
Saudi Arabia’s non-oil private sector growth steady in May with PMI at 56.4
Saudi Arabia:
Saudi Arabia’s private sector non-oil growth remained steady in May, with the
Kingdom’s Purchasing Managers’ Index reaching 56.4, a slight decline from 57 in
April, official data showed.
According to the Riyad Bank Saudi Arabia PMI
report by S&P Global, business activity in Saudi Arabia rose at a substantial
rate in May, continuing a period of robust output growth across the non-oil
economy.
In March, PMI stood at 57, while it was 57.2 in
February and 55.4 in January.
S&P Global noted that any PMI reading above 50
indicates growth in the non-oil sector, while readings below 50 signal
contraction.
Naif Al-Ghaith, chief economist at Riyad Bank,
said: “The PMI for Saudi Arabia’s non-oil economy shows a positive trend, driven
by increasing demand as evidenced by the rise in new orders. This growth has
necessitated an increase in employment to meet the growing demand for goods and
services.”
He added: “However, the surge in demand has also
led to price pressures impacting input prices and staff costs, although the
increase in output prices has been observed at a slower pace. This balancing act
reflects the challenges faced by businesses in managing costs while trying to
capitalize on the expanding market.”
The report highlighted that business activity and
new order growth in the Kingdom remained steep in May, amid further reports of
strong demand conditions, especially in domestic markets.
Robust inventory growth continued in May after
reaching its highest on record in April, as companies sought to prepare for
strong sales performances in the future.
“Furthermore, the rise in inventory levels and
prices has prompted firms to adjust their purchasing behaviors to align with
their sales strategies. This cautious approach indicates a strategic response to
the changing market dynamics and the need to maintain a sustainable business
model,” added Al-Ghaith.
The PMI survey noted that companies reported
increasing their activity due to strong demand conditions and efforts to fulfill
pending workloads.
The report added that business growth was broad
across the monitored sectors, with construction noting the sharpest expansion.
Moreover, companies operating in the non-oil
private sector increased their employment levels in May, primarily driven by
higher workloads, offsetting the first decline in over two years in April.
Al-Ghaith further noted that Saudi Arabia’s
efforts to diversify the Kingdom’s economy will strengthen the growth of the
non-oil gross domestic product.
“The latest flash estimates of the non-oil GDP
growth in the first quarter and the forecast for the second quarter suggest a
continuation of this upward trajectory. It is anticipated that the non-oil GDP
growth will exceed 3 percent, driven by ongoing efforts to diversify the economy
in line with Vision 2030,” said Al-Ghaith.
He added: “This strategic vision underscores the
government’s commitment to reducing its dependence on oil revenues and fostering
a more diversified and resilient economy, paving the way for sustained growth
and development in various sectors.”