Saudi Arabia’s Non-Oil Private Sector Maintains Strong Growth in February

Saudi Arabia’s non-oil private sector maintained its robust growth momentum in February, driven by strong customer demand, rising employment, and a positive economic outlook, according to the latest Riyad Bank Purchasing Managers’ Index (PMI) report.

The PMI for February stood at 58.4, reflecting a slight dip from January’s decade-high of 60.5, yet still signaling strong expansion. The report attributed this resilience to growing domestic and international demand, improved supply chains, and solid business confidence.

Saudi Economy Outperforms Regional Peers

Despite the slight PMI decline, Saudi Arabia’s non-oil sector continued to outperform other regional economies. Kuwait’s PMI slowed to 51.6, accompanied by job cuts, while Egypt’s fragile recovery saw a marginal decline to 50.1, marking its second consecutive month above the neutral 50-mark.

Naif Al-Ghaith, Chief Economist at Riyad Bank, stated:
“Despite a minor dip in PMI, Saudi Arabia’s non-oil economy remains on a strong trajectory. Rising domestic and international demand, along with continued improvements in supply chains, suggest that business activity will maintain positive momentum in 2025.”

The PMI measures non-oil sector growth, with a score above 50 indicating expansion and below 50 signaling contraction. While February’s PMI was slightly lower than January’s, business conditions remained strong, supported by consistent new orders and rising exports.

Surging Demand and Export Growth

The report highlighted flexible demand conditions, with 35% of surveyed firms reporting an increase in new business orders, while only 5% noted a decline. New export orders surged, reflecting strong international demand for Saudi non-oil goods and services.

Additionally, some firms credited promotional pricing strategies for attracting new customers, further supporting the sector’s expansion.

Employment Reaches 16-Month High

A key highlight of February’s PMI report was the significant rise in employment, as hiring activity reached its highest level in 16 months. Businesses expanded their workforce to keep up with growing workloads, particularly in the manufacturing and services sectors.

Al-Ghaith emphasized:
“The surge in employment levels reflects business confidence in future demand. Companies are expanding their teams to meet growing workloads, indicating optimism about continued economic growth.”

Government Initiatives Driving Growth

Saudi Arabia’s non-oil sector continues to benefit from government initiatives under Vision 2030, which promote economic diversification and infrastructure development.

Companies cited policy support and increased investment as key drivers of strong sales and production levels, with rising tourism activity further boosting demand.

Cost Pressures and Pricing Strategies

Despite strong business conditions, firms faced persistent cost pressures in February. Rising wages and raw material costs contributed to higher input prices, although the rate of inflation eased to a four-month low, offering some relief.

To offset rising costs, many businesses introduced modest price increases for their products and services. However, competitive market conditions kept price hikes in check, ensuring continued strong customer demand.

Optimistic Outlook for 2025

Saudi businesses remain highly optimistic about future growth, with confidence levels reaching their highest point since November 2023. The optimism is fueled by anticipated economic expansion, rising investment opportunities, and improving supply chain efficiencies.