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Saudi Arabia’s non-oil private sector economy slumped in March as the Middle East war disrupted supply chains, leading to a steep drop in new orders and signalling a deterioration in business conditions for the first time in nearly six years, a new survey showed.
The Riyad Bank Saudi Arabia PMI fell to 48.8 in March from 56.1 in February, slipping below the 50.0 neutral threshold to indicate a contraction in overall business conditions.
“The softer reading was mainly driven by a pause in new orders as clients adopted a more cautious stance. Export orders saw a notable pullback, with some firms reporting a temporary slowdown in cross-border activity,” said Naif Al-Ghaith, Chief Economist at Riyad Bank.
Business activity and new orders were hit by the Middle East war, with both seasonally adjusted indices falling below the no change level for the first time since August 2020. Respondents said new projects were put on hold and clients delayed spending decisions pending clarity on the conflict.
Export orders were particularly affected, with March data showing the fastest decline in almost six years.
With supply chains under pressure, delivery times worsened as shipping delays and higher fuel costs strained logistics, leading to the sharpest rise in backlogs since July 2018.
Overall input costs rose at the slowest pace in a year as wage inflation eased from February’s record high. However, several firms reported that higher fuel prices and freight surcharges lifted purchasing costs and pushed up selling prices.
Output expectations weakened sharply in March to their lowest level since June 2020, though firms remained broadly optimistic.
(Writing by Brinda Darasha; editing by Seban Scaria)
