Riyadh – Mubasher: The seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers’ Index (PMI) increased to 59.8 in February 2023, compared with 58.2 in January, marking the fastest growth in non-oil private sector business conditions in nearly eight years since March 2015.
The report highlighted that any index reading above 50 reflects an improvement in the health of the non-oil sector.
Saudi Arabia’s strong PMI reading in February was partly down to a sharp and accelerated increase in new business inflows; more than 42% of the surveyed companies said that new orders increased over the latest survey period, attributing this to an improvement in market conditions.
Export orders, in addition, rose at a sharp and quicker pace, with total new orders increasing to the greatest extent in February this year since September 2014.
Chief Economist at Riyad Bank, Naif Al Ghaith, said: "Despite tighter monetary conditions, demand and supply balance seemed robust and spurred by the ongoing projects around the Kingdom, causing sharper uplifts in output and new orders for firms, as well as rising demand for labour.”
The outlook for activity over the next 12 months was also strong in spite of the decline from January's two-year high.
Non-oil firms witnessed stronger expansions in employment and purchasing during February, where job numbers rose at the second-fastest rate in five years. Input purchases grew sharply and at the fastest pace for three months, while firms expanded their inventories when compared to January.
However, higher input demand caused some vendors to increase their prices, which led to a rise in purchasing costs. Inflation picked up to the highest level since November 2022.
Al Ghaith added: "Prices have responded to the surge in demand, with the increase in input costs evident especially in the services and construction sectors. To that end, we maintain our inflation forecast just below 3% amid the ongoing cost pressures and the current elevated demand that we believe will continue in the medium term.”
Regarding the future outlook, the economist elaborated: "The outlook for activity for the year ahead is still positive, scoring the second highest in two years and remaining above the average recorded in 2022.”
Businesses in Saudi Arabia lifted their output charges in a bid to pass rising expenses onto clients. Output price inflation accelerated markedly and was solid overall in February after a decline to an 11-month low in January. This was met by a robust improvement in supplier performance and sharp reduction in lead times.
