Saudi PMI eases to 53.1 in July but keeps up fourth straight months of expansion

Saudi Arabia’s Purchasing Managers’ Index (PMI) held its ground in July, dropping marginally to 53.1 from 53.3 in June and marking a fourth straight month of expansion, according to Riyad Bank Saudi Arabia’s latest report (pdf). While the reading stayed comfortably above the neutral 50.0 mark — thanks to rising output and new orders due to recovering spending levels — high freight costs and the renewed conflict kept the index below its long-term historical average of 56.8.

Don’t overthink the dip. “I wouldn’t read too much into a small move. The main takeaway is that the PMI continues to indicate solid expansion in the non-oil economy, albeit at a lower level than before the war.” Khalij Economics Director Justin Alexander tells EnterpriseAM. MT Trading Senior Economist Ahmad Chreim agrees, calling it “a natural moderation rather than a loss of momentum.”

Domestic demand sustained output and new orders growth, though the pace cooled. Around 19% of firms reported higher activity in July against just 4% posting declines, with growth pinned to rising new business volumes and the ongoing normalization of conditions after regional conflict disruptions. Still, the uplift in new orders eased from June and stayed mild by historical standards.

The global market again offered little help: Foreign orders contracted for the fifth month running, with firms citing elevated freight charges and competitive pressures — though the rate of decline eased to its softest in the current sequence.

Supply chains kept improving, with delivery times shortening for the third straight month and at the quickest pace since February. Firms credited better vendor responsiveness and a shift toward local sourcing. Backlogs of work fell at the fastest rate since April 2025, a sign of spare capacity building in the sector.

MEANWHILE- Cost pressures stayed elevated but showed signs of easing. Input costs rose at their slowest pace in four months, though the rate remained sharp by historical standards, with regional tensions still feeding into raw material costs and transport fees. Staff costs also climbed at their fastest in five months as firms adjusted salaries. Those pressures fed through to output prices, which rose sharply but a touch slower than in June.

Confidence slipped from June’s five-month high. Just 8% of non-oil private sector firms expect output to grow over the year ahead. Concerns about regional tensions and greater competition tempered expansion plans, the report noted.

Riyad Bank’s outlook, however, remains positive. “The sustained expansion in domestic demand, resilient business activity and improving supply side conditions reinforce our expectation that Saudi Arabia’s non-oil economy will maintain solid growth momentum through the second half of the year,” Naif Al Ghaith, the bank’s chief economist, said in the report.