Saudi Arabia's Non-Oil Sector Shows Signs of Revival as Employment Growth Surges
Tuesday, Sep 3, 2024 11:00 pm ET
1min read Saudi Arabia's non-oil private sector showed signs of recovery in August, benefiting from improved local business conditions and employment growth, although the Purchasing Managers' Index (PMI) remained below early 2022 levels.
According to the latest data, Riyad Bank's PMI rose from 54.4 in July to 54.8 in August. Though this marked the first positive growth since February, indicating an improving business environment, the growth rate remained slower compared to the recent average. The August PMI was still below its long-term average of 56.9.
The output growth of the non-oil private sector had been weak since early 2022. However, employment growth emerged as a key driver improving business conditions. In August, employment grew at the fastest pace in nearly a decade, second only to the peak in October 2023, marking the highest growth rate since early 2015.
Business activity levels also showed resilience. The increase in new orders and government investment were major drivers. Companies also reported a rise in overseas sales. Despite this, new business growth in August was relatively moderate compared to recent years, partly due to heightened market competition, making it difficult for some companies to boost sales.
To maintain demand intensity, non-oil businesses reduced sales prices for the second consecutive month in August, though the reduction was slightly smaller than in the previous survey period. Survey data indicated that non-oil companies had increased optimism about future activities, with annual expectations reaching their highest level since March.
Riyad Bank's chief economist Naif Al-Ghaith noted that the Saudi non-oil sector continues to demonstrate economic resilience. Employment growth is the key factor driving this momentum, and the increase in new orders in August indicates that the non-oil sector has the capacity to meet the growing market demand.
According to the latest data, Riyad Bank's PMI rose from 54.4 in July to 54.8 in August. Though this marked the first positive growth since February, indicating an improving business environment, the growth rate remained slower compared to the recent average. The August PMI was still below its long-term average of 56.9.
The output growth of the non-oil private sector had been weak since early 2022. However, employment growth emerged as a key driver improving business conditions. In August, employment grew at the fastest pace in nearly a decade, second only to the peak in October 2023, marking the highest growth rate since early 2015.
Business activity levels also showed resilience. The increase in new orders and government investment were major drivers. Companies also reported a rise in overseas sales. Despite this, new business growth in August was relatively moderate compared to recent years, partly due to heightened market competition, making it difficult for some companies to boost sales.
To maintain demand intensity, non-oil businesses reduced sales prices for the second consecutive month in August, though the reduction was slightly smaller than in the previous survey period. Survey data indicated that non-oil companies had increased optimism about future activities, with annual expectations reaching their highest level since March.
Riyad Bank's chief economist Naif Al-Ghaith noted that the Saudi non-oil sector continues to demonstrate economic resilience. Employment growth is the key factor driving this momentum, and the increase in new orders in August indicates that the non-oil sector has the capacity to meet the growing market demand.
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