Non-oil private sector growth slightly slower in March

Non-oil business activity in the Kingdom slowed its expansion slightly in March, according to the Riyad Bank Saudi Arabia PMI (pdf). The seasonally adjusted headline figure came in at 58.1 in March, dipping down from February’s reading of 58.4, as new business growth continued to increase, albeit at its slowest rate since October 2024.

The new orders subindex fell to 63.2, down from 65.4 in February, according to Reuters. Although the rate of growth in new orders slowed from the 14-year high seen in January, non-oil firms saw a “robust demand environment” at the end of the quarter, driven by enhanced marketing efforts, lower selling prices, and general improvements to economic conditions. Similarly, new orders from foreign markets also continued to rise, albeit at a slower rate.

Firms’ purchasing activity continued to rise, with businesses reporting another sharp rise in their total inventories — the fourth largest expansion recorded in series history. Meanwhile, input cost inflation fell to its lowest level in over four years, with firms seeing markedly weaker increases in purchasing prices. This, coupled with competition across the non-oil economy, led to a drop in selling prices — the first in six months.

Employment growth remained largely unchanged from February’s 16-month high, boosted by the increased sales volumes, with firms emphasizing “efforts to build their sales teams and overall capacity.” The first quarter of the year marked “the fastest pace of jobs growth since the third quarter of 2012,” according to survey data.

“Rising employment rates are a direct benefit of businesses scaling up operations to meet demand,” Riyad Bank Chief Economist Naif Al Ghaith said.

Staying the course: “While we acknowledge the risks associated with lower oil revenue and rising government and external debt, we believe that the recalibration of infrastructure spending will maintain a strong sovereign balance sheet and external position,” S&P Global Ratings Head of Analytics Hina Shoeb said in a recent webinar. The World Bank also expects “robust activity in the non-oil sector — especially in services — as well as higher oil production and exports,” it said in its latest Global Economic Prospects report.

Not everyone seems to agree with this notion, however, with Capital Economics doubting the non-oil sector will withstand fiscal policy tightening. “We think GDP growth will accelerate this year as oil output cuts are unwound, but activity in the non-oil sector is likely to soften on the back of a turn to fiscal consolidation,” Capital Economics’ James Swanston wrote in a separate note.