Saudi Non-Oil Business Activity Rebounds to Three-Month High in May

Saudi Arabia’s non-oil private sector recorded its strongest expansion in three months during May, as business conditions improved following earlier disruptions and domestic demand strengthened, according to the latest Riyad Bank Purchasing Managers’ Index.

The survey, compiled by S&P Global, showed the Kingdom’s PMI rising to 52.8 in May from 51.5 in April, signalling a return to firmer growth after softer conditions in recent months.

The rebound follows a difficult period for businesses after March disruptions linked to regional tensions. Iran’s retaliatory strikes across the Gulf triggered widespread operational challenges, including airport closures, suspended port activity and volatility in financial markets, contributing to the most significant business disruption seen in the region since the COVID-19 pandemic.

Despite those challenges, May data suggested that the slowdown was temporary rather than long-lasting.

Naif Al-Ghaith, chief economist at Riyad Bank, said the latest reading reflected renewed momentum in business activity.

“The reading remained comfortably above the neutral 50 threshold, confirming that non-oil economic conditions expanded and that the recent slowdown was temporary rather than structural,” he said.

Saudi Arabia continues to place non-oil growth at the centre of its Vision 2030 economic transformation programme as it seeks to diversify sources of income and reduce reliance on oil revenues.

Survey respondents linked the recovery in May to improved operating conditions, stronger domestic demand and the restart of previously delayed projects. Businesses reported that easing disruption allowed production activity to regain pace.

While output strengthened, demand conditions remained mixed. New orders rose modestly but stayed below the long-term trend. Firms cited improving economic conditions and resumed projects as positive drivers, although delayed client spending and intense market competition continued to limit faster growth.

External demand remained under pressure for a third consecutive month. Export orders declined sharply as companies faced shipping disruptions, higher freight and fuel costs, and uncertainty linked to regional geopolitical tensions.

Supply-chain conditions, however, showed encouraging signs of improvement. Supplier delivery times shortened for the first time since February, with firms increasingly relying on local suppliers to reduce delays caused by international shipping disruptions.

This improvement encouraged companies to increase purchasing activity for the first time in three months as businesses sought to rebuild inventories and prepare for future demand.

“An important positive development was the improvement in supplier delivery times for the first time in several months, suggesting that supply chain conditions are gradually stabilizing,” Al-Ghaith said.

Employment also returned to growth in May after the first decline in staffing levels in two years recorded in the previous survey. Hiring remained moderate compared with earlier in the year but helped ease mounting pressure from rising workloads, with backlogs increasing for an eleventh consecutive month.

Inflation conditions remained relatively contained. Saudi Arabia’s annual inflation rate stood at 1.7 percent in April 2026, among the lowest globally. Businesses reported higher transport and supplier costs but demonstrated greater ability to pass some of those increases to customers without significantly affecting domestic demand.

Al-Ghaith said the latest survey results support expectations that Saudi Arabia’s non-oil economy will maintain growth through the remainder of 2026, supported by domestic demand, stabilizing supply chains and continued government-led investment.