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Saudi non-oil private sector keeps momentum in April

Saudi non-oil private sector keeps momentum in April
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Riyadh – Mubasher: The headline seasonally adjusted Purchasing Managers’ Index (PMI) of Saudi Arabia was unchanged at 57 in April 2024, the same as in March, indicating continued strong operating conditions in the non-oil private sector, according to Riyad Bank’s latest data.

The PMI is a measurement of the operating conditions in the non-oil private sector where a reading above 50 marks growth.

April's growth was driven by strong demand, particularly in domestic markets, leading to significant expansion in business activity.

Naif Al Ghaith, Chief Economist at Riyad Bank, said: “This uptrend hints at an anticipated spike in the non-oil GDP, likely exceeding the 4.5% mark for this year. Noteworthy is the surge in new orders and inventory expansion, indicative of a proactive response to mounting demand within the market.”

Expectations of sustained sales growth prompted firms to increase purchasing activity, resulting in record-high inventory levels. While cost concerns led to a slight decrease in employment, overall input price inflation eased to a nine-month low.

New orders showed considerable monthly expansion, driven by competitive pricing, promotional activity, and expanding client bases, especially in the domestic market. Wholesale and Retail sectors experienced the strongest output expansion.

Positive outlooks spurred increased purchasing activity, leading to a surge in inventories. Despite faster delivery times, backlogs of work rose, and employment levels decreased for the first time in over two years due to cost and cash flow concerns.

“Despite a decline in employment figures, there's a notable increase in the costs associated with employment to incentivise the workforce. This strategy aims to bolster productivity and ensure the retention of skilled workers within the expanding economy,” Al Ghaith underlined.

He noted: “The prevailing strength in demand, along with strategic marketing initiatives and corporate expansions in both wholesale and retail sectors, further fortifies the positive trajectory of the Saudi economy.”

“With a persistent emphasis on growth and development in the non-oil sector, the Saudi PMI's consistent performance underscores a promising outlook. The sustained expansion, coupled with evolving market dynamics, underscores a favourable environment for continued economic prosperity and stability in Saudi Arabia's non-oil economy,” the economist added.

It is worth noting that Saudi Arabia’s PMI reading declined from 57.2 in February to 57 in March 2024.