Arab News: Saudi Arabia’s non-oil private sector recorded its strongest improvement in business conditions since February in September, with the Riyad Bank Purchasing Managers’ Index rising to 55.3 from 53.8 in August.
According to the PMI report compiled by S&P Global, new orders increased at their fastest pace since the second month of the year and moved closer to their long-run average, suggesting that demand recovered after a slowdown in the middle of 2026.
Firms linked the pickup to improving market conditions, higher client numbers and stronger spending.
The improvement came despite regional tensions disrupting shipping and weighing on business sentiment. The US-Israeli war with Iran has impacted traffic through the Strait of Hormuz and the Red Sea, adding to supply-chain and transport concerns.
Despite the uncertainty, Saudi Arabia’s non-oil economy continued to expand while overall output weakened. In September, the General Authority for Statistics reported that non-oil activities grew 0.9 percent year on year in the second quarter of 2026, while the Kingdom’s real gross domestic product declined 4.7 percent over the same period.
Naif Al-Ghaith, chief economist at Riyad Bank, said: “The September results are broadly consistent with the wider picture of the Saudi economy, where domestic consumption, investment activity, government and Public Investment Fund-related projects, and continued credit availability remain important supports for non-oil activity.”
Commenting on the PMI report, Hamza Dweik, Head of Trading for the Middle East and North Africa at Saxo Bank, said: “The underlying expansion remains healthy, although maintaining this pace will depend increasingly on the resilience of domestic demand.”
Echoing similar views, Raymond Khoury, senior partner and innovation practice lead at Arthur D. Little Middle East, said that “non-oil firms in the Kingdom are responding to genuine demand rather than simply clearing backlogs.”
Khoury added: “The outlook remains constructive, but softer output growth and weaker business confidence in September suggest the acceleration should be viewed as continued expansion rather than the start of a sharp new upswing.”
Hiring and purchasing pick up
Firms responded to stronger new-order intakes by expanding capacity, adding sales teams and technical staff to support new investments.
“The increase in outstanding business for the first time since May, alongside stronger hiring and purchasing — with input purchases reaching a seven-month high — also suggests that firms are building operational capacity rather than simply responding to temporary demand,” added Al-Ghaith.
Cost pressures remained elevated in September, with firms reporting sharp increases in material and transport prices.
Overall input inflation edged down slightly, but selling charges still rose at a substantial pace, with the rate of inflation the second-fastest in more than six years.
Dweik said that the ability of companies to raise selling prices alongside stronger domestic orders suggests demand remains resilient.
“The question over the coming months will be whether these higher business costs remain concentrated at the corporate level or begin feeding more noticeably into consumer prices,” the Saxo Bank official added.
Activity outlook weakens
Supply disruptions persisted during September, with delivery times improving only marginally and at the weakest pace in five months.
Greater geopolitical uncertainty contributed to a slower rate of activity growth in September, which eased to a five-month low, while confidence about future output also declined, the report noted.
Demand remained predominantly domestic. Orders from foreign clients fell for a seventh consecutive month, although the pace of decline softened considerably. Companies cited supply-chain disruption as a drag on export sales.
“Geopolitical and supply-chain pressures are currently constraining firms’ ability and willingness to convert demand into activity, rather than undermining demand itself. If disruptions persist, however, they could increasingly affect investment decisions, delivery times and margins,” said Arthur D. Little's Khoury.
https://www.arabnews.com/business/saudi-non-oil-pmi-rises-to-553-highest-since-february-3004675
