Saudi Arabia’s non-oil private sector recorded a slight improvement in operating conditions in May, with the seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers’ Index (PMI) increasing to 55.8 from 55.6 in April, according to data compiled by S&P Global. The index remains above the neutral 50.0 mark, signalling continued expansion, but below the year’s high of 60.5 recorded in January.
The uptick in the headline PMI was driven solely by stronger new order growth, while the other four sub-components—output, employment, suppliers’ delivery times, and stocks of purchases—exerted a downward pull on the index.
New orders rose at a faster pace, rebounding from an eight-month low in April. Firms attributed the increase to improved domestic demand, industrial activity, marketing campaigns, and new project starts. Foreign orders also grew, though at the slowest pace in seven months.
Business activity increased in May but eased for the fourth consecutive month, marking the slowest rate of growth since September 2024. The construction sector reported the strongest gains in both activity and new business.
Employment rose at one of the fastest rates in over a decade, supported by business expansion plans and growing output needs. Purchasing activity accelerated to a 14-month high, but firms remained cautious about stockpiling, resulting in a more moderate increase in inventories.
Input costs continued to rise, driven by higher supplier charges and raw material prices, though overall cost inflation slowed compared to April due to easing wage pressures. Despite this, firms reduced selling prices, largely due to competition and lower charges in the services sector.
Business confidence rose sharply, reaching its highest level since late 2023. Companies cited expansion plans and expectations of continued demand growth as drivers of improved sentiment.
Naif Al-Ghaith, Chief Economist at Riyad Bank, said the non-oil economy maintained steady momentum in May. He noted that improved demand, labour capacity, and purchasing activity point to a stable operating environment as the private sector enters the second half of 2025.
