Saudi Arabia’s Non-Oil Private Sector Growth Reaches Four-Month High in June

Saudi Arabia’s non-oil private sector recorded its fastest growth in four months in June, supported by stronger domestic demand and a rise in new business, according to the latest survey from Riyad Bank and S&P Global.

The Riyad Bank Purchasing Managers’ Index (PMI) increased to 53.3 in June from 52.8 in May, marking its highest reading since February. Any reading above 50 indicates expansion in business activity.

The latest data suggests the Kingdom’s non-oil economy continued to strengthen at the end of the second quarter, supported by domestic spending and investment despite ongoing challenges in export markets. The figures also highlight continued progress in Saudi Arabia’s efforts to diversify its economy under the Vision 2030 program.

Naif Al-Ghaith, chief economist at Riyad Bank, said the higher PMI reflected improved business conditions across the private sector.

“Saudi Arabia’s non-oil economy maintained a solid expansion in June, with the PMI rising to 53.3 from 52.8 in May,” Al-Ghaith said. He added that stronger production and the fastest increase in new orders since February indicated that business activity regained momentum toward the end of the quarter.

The survey showed that around 18 percent of businesses reported higher output during June, while only 2 percent recorded lower production. Companies attributed the increase to new project approvals, stronger customer demand and renewed sales after earlier delays.

New orders also rose at their quickest pace in four months, driven by stronger domestic spending and improved investor confidence. Some businesses also linked the recovery to easing concerns over regional tensions.

Despite the positive domestic outlook, export demand remained under pressure. New business from overseas customers declined for the fourth consecutive month as firms pointed to logistics disruptions and stronger competition in international markets.

Business confidence strengthened during June, with the Future Output Index reaching its highest level since January. Many companies expressed optimism that improving market conditions and potential regional peace agreements would ease supply chain disruptions and support growth during the second half of the year.

While demand improved, employment levels remained largely unchanged as businesses remained cautious about rising operating costs. Purchasing activity expanded only modestly, with many firms reporting that existing inventories were sufficient. Outstanding workloads also declined for the first time in a year.

The survey found that cost pressures remained elevated, making the second quarter the strongest period of input price inflation in 15 years. Rising purchase costs and higher staff expenses prompted many businesses to increase selling prices, with 22 percent of surveyed firms raising charges during June.

Supply chain conditions showed signs of improvement, with supplier delivery times improving at the fastest pace since February. Companies credited greater reliance on local suppliers and alternative transport routes for the faster deliveries.

Al-Ghaith said businesses continued to manage higher costs without significantly affecting overall activity or confidence, reflecting the resilience of Saudi Arabia’s growing non-oil economy.