Riyadh – Mubasher: Saudi Arabian non-oil businesses experienced a notable uptick in growth momentum during February 2024, with business activity surging at the fastest rate in five months after a dip to a two-year low in January.
The headline figure, the seasonally adjusted Saudi Arabia Purchasing Managers’ Index (PMI), jumped from its recent low of 55.4 in January to 57.2 in February. This reading comfortably exceeded the 50 mark, signifying growth across the non-oil private sector economy, according to a report by Riyad Bank.
The acceleration in new order growth fueled a robust increase in employment, although competitive pressures persisted, hampering demand and pricing decisions.
Expectations regarding future activity remained positive, while supply chains remained robust, facilitating a significant rise in inventories.
Business activity accelerated sharply, marking the strongest growth since September 2023, as firms attributed the rise in output to improving client demand and increased tourism activity.
Similarly, new work inflows increased at a faster pace compared to January, although softer than the final quarter of 2023.
Despite reports of new client wins and improved market conditions, some firms experienced a decline in sales due to heightened competition. Export orders remained subdued, despite a slight uptick in February.
The surge in output and new business spurred labour demand, resulting in one of the sharpest increases in employment over the past eight years.
Optimism for future demand trends strengthened, driving robust purchasing activity to ensure a steady inflow of inputs at discounted prices from suppliers. Consequently, inventory levels rose sharply, accompanied by improved delivery times.
However, the growth rate of new purchases moderated slightly to its weakest in nine months.
With stocks accumulating and staff levels rising, companies effectively reduced outstanding workloads, facilitated by eased administrative requirements.
Input price inflation softened in February, although input costs continued to rise sharply overall, albeit at the slowest pace since July last year. Purchase prices and staff costs increased at the slowest rates in five and six months, respectively.
Selling price inflation cooled to a marginal level, as firms grappled with passing on higher costs to customers amidst threats of increased competition.
Consequently, charge inflation remained subdued compared to cost increases, suggesting a squeeze on margins.
Naif Al-Ghaith, Chief Economist at Riyad Bank, commented: “The survey results signalled expectations of a modest recovery in demand this year driven by the acceleration of Vision 2030 projects.“
“Employment in non-oil sectors spiked this month, as highly skilled workers were needed to fulfil rising demand and increased output. This aligns with Saudi Arabia’s objective to create a more resilient and diverse job market,” Al-Ghaith added.
He said: “Despite strong demand from clients during the month, the rate of output price inflation softened as a consequence of a highly competitive market.”
In January, Saudi Arabia’s headline seasonally adjusted PMI dropped to 55.4 from 57.5 in December 2023.
