Non-oil private sector activity in Saudi Arabia declined in May, according to a new business survey released on Monday, as both new orders and output growth slowed. However, employment growth has accelerated to a rate that is tied for the fastest since the year began.
The two main sub-indices that make up the PMI, New Orders and Output, both fell in May, bringing the headline PMI down to 58.5 from 59.6 in April. However, it was still above its long-term 56.9 average and far above the 50.0 growth criterion.
According to the Riyadh Bank PMI, non-oil private sector firms had a significant increase in new orders in May, after April’s explosive expansion, which was the fastest in little over eight and a half years. Even while sales to international customers have picked back up, growth has slowed marginally.
Most Saudi enterprises are healthy and enjoying robust business circumstances, according to Naif Al-Ghaith PhD, Chief Economist at Riyad Bank. “While a slower oil economy and rising interest rates will create a challenging environment for some establishments, most Saudi firms are in good shape and experiencing robust business conditions,” he added.
Activity rose again in May, albeit at a slower pace than in earlier months in 2023.
He said, “May results show a small retracement from the strong April outcome, reinforcing the view that overall economic activity is holding up well as we enter the summer months.”
During this time period, companies boosted their purchasing of inputs and critical components by the most they had in five months.
Job growth was robust, with the rate of new hires increasing to the joint-fastest it’s been since the year started.
“New orders increased significantly, suggesting robust demand growth, especially in the tourist and construction industries. This has resulted in the joint-fastest rate of employment creation since 2018, which Al-Ghaith says has helped businesses clear their queues more quickly this month.
Companies were able to make progress on backlogs at a faster rate in May because to increased employment and activity.
While companies are less bullish about their future output than they were a year ago, that confidence is still there.
In order to stimulate the private sector—the “engine” of employment creation, according to Al Ghaith—”the government continues to implement large-scale diversification policies and accelerate the development of giga-projects.”