Saudi Arabia’s non-oil sector experienced a notable deceleration in growth during June, marking its slowest expansion in two and a half years. Despite this slowdown, the sector continues to demonstrate resilience and maintain a healthy growth trajectory, according to the latest Purchasing Managers’ Index (PMI) survey released on Wednesday.
The seasonally-adjusted Riyad Bank Saudi Arabia PMI declined to 55.0 in June from 56.4 in May, reaching its lowest level since January 2022. However, it’s important to note that this figure still comfortably exceeds the 50-point threshold, which separates growth from contraction in the index.
A key factor contributing to the overall slowdown was the deceleration in new orders. The sub-index for new orders dropped to 56.0 from 59.5 in the previous month, indicating a moderation in demand. Additionally, job creation in the non-oil private sector also experienced a slight downturn, further contributing to the overall slowdown in growth.
Despite these challenges, there were some positive indicators. The output sub-index showed a slight increase, suggesting that businesses were still able to maintain and even marginally improve their production levels.
Naif Al-Ghaith, Chief Economist at Riyad Bank, provided an optimistic interpretation of the data. He emphasized that when considering the second quarter as a whole, the growth figures still paint a positive picture for non-oil GDP in Saudi Arabia. Al-Ghaith projected that growth could exceed 3%, underlining the continued expansion of the non-oil economy.
The economist highlighted several factors supporting this positive outlook, including high output levels, stable supply chains, and moderate job creation. These elements, he argued, point towards a resilient and expanding non-oil economy, despite the slight moderation in growth rate.
This latest PMI data comes at a crucial time for Saudi Arabia, as the kingdom continues its efforts to diversify its economy away from oil dependency under its Vision 2030 plan. The sustained growth in the non-oil sector, even if at a slower pace, is a positive sign for these diversification efforts.
While the June figures indicate a cooling in the rapid expansion seen in recent months, they also suggest that the Saudi non-oil economy is maintaining a steady course of growth.