Saudi Arabia's non-oil private sector remained in expansion territory in July amid a strong increase in business activity despite continued regional headwinds stemming from the ongoing conflict in the Middle East, Riyad Bank and S&P Global said Tuesday.
The Riyad Bank Saudi Arabia PMI edged down to 53.1 in July from 53.3 in June but stayed above the neutral 50.0 threshold, indicating growth in the sector for the fourth month in a row on the back of sustained improvement in operating conditions.
Non-oil companies saw upturns in new orders and output, bolstered by improved domestic demand, although the rise in new orders moderated since June. International orders, on the other hand, fell for the fifth straight month, impacted by regional tensions, elevated freight costs and competitive pressures.
"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," Riyad Bank Chief Economist Naif Al-Ghaith said. "Cost pressures also showed signs of gradual easing. 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."
In terms of employment, data showed an increase in staff numbers after a stagnation in June, although the rate of job creation remained "well below" that observed at the start of the year. Staff costs, meanwhile, grew at their strongest pace in five months as inflationary pressures led to salary adjustments.
Looking ahead to the next 12 months, business confidence softened from a five-month high in June, as concerns over regional tensions and increased competition tempered companies' plans to expand.
"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 added.
