Saudi private sector growth: Purchasing Managers' Index (PMI) registers 51.5 points

Recent economic data shows a strong return to growth for Saudi Arabia's non-oil private sector in April, a positive sign reflecting the economy's resilience and ability to recover despite regional and global challenges. The Purchasing Managers' Index (PMI) issued by Riyad Bank, a key indicator of the sector's health, rose significantly to 51.5 points, compared to 48.8 points in March. A reading above 50 points is a crucial dividing line between growth and contraction, confirming an overall improvement in operating conditions.

This recovery is driven by companies increasing their production rates in response to growth in new business and incoming orders. Companies participating in the survey reported an increase in customer numbers and improved demand levels. New business received by non-oil-producing companies saw a marked improvement in April, after a decline the previous month, bolstering confidence in the sustainability of economic activity.

General context and Vision 2030

This growth is part of the Kingdom’s broader efforts to diversify its economy and reduce its reliance on oil, a cornerstone of Saudi Vision 2030. The Vision aims to empower the private sector to become the primary driver of economic growth and job creation. The Purchasing Managers’ Index (PMI) serves as a periodic indicator of the success of these policies in achieving their objectives, with improvements in the index reflecting success in creating a business environment conducive to investment and expansion.

Challenges and expected impacts

Despite the positive performance, the data revealed ongoing challenges, most notably rising production costs. Non-oil producers experienced a rapid increase in cost burdens during April, as regional disruptions impacted raw material prices and shipping costs. Overall input costs rose at the fastest pace in the survey's history, prompting companies to raise their selling prices by a near-record percentage. However, the latest reading suggests a slight recovery in operating conditions following the disruptions of March.

Domestically, this growth boosts investor confidence and supports efforts to create jobs for citizens. Regionally and internationally, this performance highlights the strength and resilience of the Saudi economy, making it a more attractive investment destination for foreign capital seeking stable markets with promising growth potential. While companies have indicated a slight increase in their activity forecasts for the coming year, the strong performance of the non-oil private sector remains tangible evidence that the Kingdom’s economic reform program is on the right track.