Recovering domestic demand and local customer spending helped bolster operating conditions in Saudi Arabia's non-oil private sector in June, the Riyad Bank said Sunday.
The seasonally adjusted Riyad Bank Saudi Arabia PMI came in at a four-month high of 53.3 in June, up from May's 52.8. New business from domestic clients climbed at the fastest rate since February, reflecting project approvals and a rebound in sales after previous delays.
As investor sentiment over the regional conflict improved, non-oil business activity in June increased at a pace "broadly consistent" with the prior month, as 18% of surveyed firms reported increased production versus the 2% flagging declines.
Supply chains also improved, with delivery times at their quickest pace since February, as Saudi businesses pivoted to local suppliers and alternative shipping routes. Meanwhile, purchasing activity was muted amid reports of "sufficient" inventory levels.
However, the reading came in weaker than the survey's long-run trend on persistent headwinds in export markets and heightened price pressures. The surveyed firms noted ongoing logistics challenges in the region and increased foreign competition as hurdles to international sales, while surging purchase and labor costs led to a further increase in selling prices.
"Business sentiment continued to strengthen, with firms reporting their highest level of optimism since January. The improvement in expectations points to growing confidence in the domestic business environment and suggests that companies increasingly anticipate favourable market conditions to support business activity over the coming months. This positive outlook reinforces expectations that non-oil growth will remain supported during the second half of the year," Riyad Bank chief economist Naif Al-Ghaith said.
