What’s happening?
Saudi Arabia’s non-oil sector experienced a modest recovery in August, suggesting increased confidence in the private sector.
Implications
Growth in the non-oil sector slightly improved in August, following a two-year low in July. The seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers’ Index (PMI) rose to 54.8 from 54.4. Although still below the long-term average of 56.9, the increase is a positive sign. However, the output subindex indicated a slight slowdown, dropping to 58.1 from 58.6, leading some businesses to reduce prices to attract customers. On the positive side, new order growth increased, and job growth reached its highest level since October 2022. Riyad Bank’s Chief Economist highlighted that employment growth is a key driver, reflecting greater business confidence. This rise in new orders shows businesses are optimistic about future growth.
Why it matters
For markets: Positive signs.
The recovery in the non-oil sector is encouraging for investors monitoring Saudi Arabia’s economic diversification. The slight increase in PMI and new orders suggests growing confidence that may lead to steady growth. Investors should watch for the sustainability of this recovery, as a strong non-oil sector can enhance overall economic stability.
The bigger picture: Optimistic outlook.
Saudi Arabia’s emphasis on its non-oil sector is part of a broader strategy to reduce dependence on oil. The sector’s slight rebound in August, along with higher future output expectations, indicates confidence in the kingdom’s economic policies. A robust non-oil sector can help Saudi Arabia navigate global economic challenges and achieve its long-term growth objectives.