Saudi Arabia’s non-oil economy achieved its swiftest growth in four months, propelled by a surge in client orders and an increasingly favourable economic climate.
The headline reading of the Riyad Bank Purchasing Managers’ Index (PMI) rose to 58.4 in October, up from September’s 57.2, marking the highest level since June. The 50-point mark is the threshold that separates expansion from contraction in economic activity.
Q4 Business Expansion Driven by Growing Client Orders and New Orders
Business activity continued to expand at a notable rate at the beginning of the fourth quarter, with growing client orders reflecting ongoing economic momentum. The survey of businesses also revealed a substantial increase in new orders, with this growth spanning across various sectors, including manufacturing, construction, wholesale and retail, and services.
According to Naif Al Ghaith, the Chief Economist at Riyad Bank, “Another contributing factor to the expanded PMI was the strong growth in new orders, [which] indicates a renewed sense of confidence among businesses and a willingness to invest in new projects.”
The survey also revealed a significant increase in hiring across the non-oil private sector due to strong demand and robust output expectations, marking the sharpest increase in employment since October 2014. The heated labour market led to higher wages and increased input costs, causing overall cost inflation to rise sharply, matching the fastest rate in over a year. Despite this, firms continued to offer discounts due to competitive pressures, resulting in the most significant drop in output prices since May 2020.
It’s worth noting that Saudi Arabia’s economy contracted by 4.5% annually in the third quarter due to OPEC’s largest producer’s oil production cuts. However, non-oil and government activity increased in the third quarter, with non-oil growth projected to reach 5.9% for the year, led by the trade, hospitality, and tourism sectors, according to The National News.
In the previous month, S&P Global Ratings lowered Egypt’s credit rating even further into negative territory due to the limited advancement in monetary and structural reforms. The long-term foreign and local currency sovereign credit ratings for the country were adjusted from “B” to “B-” in S&P’s rating scale, which falls into the “highly speculative” category and is positioned six levels below investment grade, according to the ratings agency.
