Non-oil activity slightly accelerates in May, backed by strong new order growth

Non-oil business activity in the Kingdom accelerated in May, driven by an expansion in new work that took place amid improvements in demand and improved business sentiment, according to the Riyad Bank Saudi Arabia PMI (pdf). The seasonally adjusted headline figure came in at 55.8 in May, up slightly from 55.6 in April.

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New orders rose substantially during the month: The new orders subindex rose to 62.5 in May, up from 58.6 in April, breaking a three-month spell of decline for the subindex, according to Reuters. The new orders index was the only subcomponent to raise the PMI in May, with businesses linking this to “increased demand, strong sales performances, industrial development and new marketing initiatives,” the report reads.

Output levels were not quite as positive, however: The pace of output growth eased to its softest level since September 2024, according to the report. Of the surveyed sectors, construction recorded the greatest hikes in both activity and new business.

Employment levels continued to increase in the Kingdom, with the month seeing one of the fastest rises in staffing in over a decade. “Hiring momentum remained strong as companies expanded teams to support output growth, particularly in operations and sales,” Riyad Bank Chief Economist Naif Al Ghaith said.

Purchasing activity also continued to rise, accelerating to a 14-month high despite “greater caution towards stockpiling,” according to the report.

This came in tandem with a rise in input prices, albeit at a slower pace than the previous month, with the slowdown coming due to subdued wage pressures. However, output prices fell in May, as competitive market conditions led to a sharp decrease in service sector charges, “contrasting with rising prices in manufacturing, construction and wholesale & retail,” National Bank of Kuwait's Issa Hijazeen told EnterpriseAM.

The future’s looking bright for Saudi businesses: “Looking ahead, sentiment among non-oil firms has strengthened visibly. Business expectations looking forward reached their highest level since late 2023. Hiring momentum remained strong as companies expanded teams to support output growth, particularly in operations and sales,” Al Ghaith said.