Saudi Arabian non-oil businesses activity rose at the quickest rate for five months in February, reaching its highest level since September 2023 following a slump to a two-year low in January. 

The Riyad Bank purchasing managers’ index (PMI) headline figure for the month reached 57.2, up from 55.4 in January. Anything above 50.0 indicates growth in business activity.

The report showed that new order growth had picked up and drove a stronger increase in employment, but competitive pressure continued to hider demand and pricing decisions.

Expectations towards future activity were buoyed, while supply chains remained in good health and supported a marked increase in inventories, the report said.

Naif Al-Ghaith chief economist at Riyad Bank, said the headline index upturn indicated strong growth of output and new orders that was driven by the services and construction sectors.

“The upturn reflected the continued thriving of non-oil activities in the Kingdom which recorded a 4.6% increase according to GSTAT flash estimates. The survey results also signalled expectations of a modest recovery in demand this year driven by the acceleration of Vision 2030 projects.

He added: “Employment in non-oil sectors spiked this month, as highly skilled workers were needed to fulfil rising demand and increased output.”

Firms said they saw a rise in output attributed to improving client demand and signs of greater tourism activity.

New work inflows rose at a sharper pace than in January, albeit remaining softer than in the final quarter of 2023.

However, some firms noted a drop in sales amid increased competition. Export orders stayed subdued overall, despite a modest rebound in February.

Purchasing activity also remained strong as firms opted to ensure a steady inflow of inputs amid a favourable demand outlook and to secure discounted prices with suppliers.

The latest survey data showed a softening of input price inflation in February. Although input costs continued to rise at a sharp pace overall, the rate of inflation was the slowest since July last year.

Purchase prices and staff costs increased to the least extent in five and six months, respectively.

While some firms passed on higher costs to their customers, a similar proportion opted to reduce their fees due to the threat of greater competition, the report said, with charge inflation remaining much softer than cost increases, signalling a worsening of margins.

(Reporting by Imogen Lillywhite; editing by Seban Scaria)