Saudi’s non-oil economy finishes 2024 with strongest sales growth

Saudi Arabia’s non-oil private sector economy ended 2024 in a strong position, as business conditions improved markedly, driven by a substantial rise in new orders.

Aided by elevated domestic demand and strengthening exports, total sales volumes increased at the fastest pace in 12 months, leading to robust upturns in business activity and inventories.

Cost inflation remained sharp in December due to strong input demand, although an easing of job creation helped to soften salary pressures. Output charges also rose, but the rate of inflation slowed amid high competition and efforts to offload stocks.

The headline figure is the seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers’ Index (PMI). The PMI is a weighted average of the following five indices: New Orders (30 per cent), Output (25 per cent), Employment (20 per cent), Suppliers’ Delivery Times (15 per cent) and Stocks of Purchases (10 per cent). For the PMI calculation the Suppliers’ Delivery Times Index is inverted so that it moves in a comparable direction to the other indices.

The headline PMI posted 58.4 in December. Although down slightly from a 17-month high of 59.0 in November, the reading signalled a marked improvement in operating conditions across the non-oil private sector. The index has remained above the 50.0 neutral mark continuously since September 2020.

Non-oil businesses indicated that strong economic conditions, combined with higher client demand and new marketing campaigns, helped to drive a considerable upturn in new work in the final month of 2024. In fact, the rate of growth was the sharpest recorded in a year, having accelerated in every month since August. Nearly four-in-ten survey respondents saw new order inflows increase during the month, with the sharpest rise observed among wholesale & retail companies.

Naif Al-Ghaith PhD, Chief Economist at Riyad Bank, said: “Saudi Arabia’s non-oil private sector ended 2024 on a high note, reflecting the successful strides made under Vision 2030. The Purchasing Managers’ Index (PMI) recorded 58.4, underscoring the sector’s resilience and expansion. This performance is a testament to the ongoing diversification of the economy, as outlined in Vision 2030, which aims to reduce reliance on oil and foster sustainable economic growth.

“The non-oil GDP is expected to grow by more than 4% in 2024 and 2025, driven by substantial improvements in business conditions. A significant rise in new orders has bolstered this growth, indicating increased market confidence and demand. This surge is supported by elevated domestic demand and strengthening exports, which have propelled total sales volumes to their highest levels in a year. Consequently, business activity and inventories have experienced robust upturns, reflecting the sector’s capacity to meet and capitalize on rising demand.

“Despite challenges such as sharp cost inflation due to strong input demand, the sector has navigated these pressures effectively. December saw a notable increase in material costs, yet wage costs rose more moderately.