Non-oil sector growth slowed in December for the first time since August, despite a record pick-up in sales and new orders, according to the Riyad Bank Saudi Arabia PMI (pdf). The seasonally adjusted headline figure came in at 58.4 in December, coming in just slightly below November’s 17-month high of 59.0, while remaining well above the 50.0 mark that separates growth from contraction. The story was also picked up by Reuters.

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New orders hit full speed in December: The new orders subindex climbed to 65.5 in December up from 63.4 the previous month, with new export order growth hitting a 17-month high on the back of product innovations and solid ties with international clients. “This surge is supported by elevated domestic demand and strengthening exports, which have propelled total sales volumes to their highest levels in a year,” Riyad Bank Chief Economist Naif Al Ghaith said.

Naturally, output followed suit: Production levels rose well above long-term trends last month, as firms ramped up activity to meet rising demand. The push to expand capacity was evident, with purchasing activity accelerating to a nine-month high as businesses lay the groundwork for sustained growth into 2025.

Firms are stocking up for the new year: December saw businesses racing to build inventories at the fastest pace since May, supported by improved supplier delivery times. Firms also took advantage of strong vendor relationships to shore up supply in anticipation of continued sales growth, giving them a buffer against future demand spikes while keeping shelves ready to meet growing demand.

Staffing level growth remained slow and steady: Job creation softened in December, reflecting a cautious approach despite the surge in activity. While staffing levels did rise, the pace eased from November, balancing out soaring input costs. Firms focused more on optimizing existing resources, and ensuring productivity remained high without putting too much strain on salary expenses.

Input costs saw a sharp increase in December, primarily driven by higher material prices. However, wage inflation remained subdued, helping to balance overall cost pressures. Some firms took a competitive stance, trimming prices to stay ahead of rivals and offload elevated stock levels. This strategy kept output charges in check, and inflationary pressure manageable.

We’re going full steam ahead: Optimism is running strong for 2025, with business expectations reaching a nine-month high, Al Ghaith said. Robust sales growth and expanding capacities have bolstered confidence across the board.

REFRESHER ON THE PAST YEAR- Private sector activity grew at the slowest clip in two years in January 2024, with the first PMI reading of last year clocking in at 55.4 before picking up to 57.2 in February, and maintaining momentum through to April (57.0). The pace of expansion gradually decelerated from May (56.4) to July (54.4), as demand softened and competition intensified, before recovering in August (54.8) and gaining further traction in September (56.3) and October (56.9). Finally, the headline figure peaked in November (59.0) driven by a surge in demand and renewed business confidence.

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