Saudi businesses gain more orders in September even as oil prices remain subdued
As orders flowed in, private sector hiring also picked up by fair margin
Dubai: Saudi businesses closed September on a strong footing, with the highest growth in new orders since May. That fed into higher employment numbers across the non-oil private sector, says the latest Riyad Bank PMI update.
September’s upbeat sentiments is quite a contrast ‘given the current context of oil production cuts and declining global oil prices’, said Naif Al-Ghaith, Chief Economist at Riyad Bank. “As oil revenues come under pressure, the robust performance of the non-oil private sector serves as a buffer, helping to mitigate the potential impact on the country's economic health.
“The diversification of revenue streams is crucial for maintaining growth amid fluctuating oil markets.”
But business owners have their share of concerns on short- to medium-term prospects. There is the increased competition to deal with, which underpins a ‘softening of future output expectations, as well as a third successive (monthly) reduction in selling charges’, says the report.
But ‘input stocks remained healthy, encouraging some firms to loosen procurement efforts’.
The diversification of revenue streams is crucial for maintaining growth amid fluctuating oil markets
Even then, upcoming decisions by OPEC+ on oil production will have a direct say on Saudi business sentiments short-term. (Brent crude is at $74.89 a barrel now, up 1.34%.)
“Rising output levels not only enhance the competitiveness of Saudi businesses but also drive forward developments aimed at expanding private sector participation in the economy," said Al-Ghaith. "This shift provides a more stable foundation for long-term growth, making the economy less vulnerable to oil price volatility.
"By expanding output across key non-oil industries, Saudi Arabia is better positioned to navigate the challenges of oil market fluctuations, ensuring a more sustainable and diversified economic future."
How did September PMI fare?
The Saudi score for the month was 56.3, which was easily the the highest in four months, cleaerly pointing to a 'notable acceleration in non-oil private sector growth'. This was brought on by a mix of higher output and new orders. "Businesses are responding to stronger domestic demand, which plays a critical role in reducing Saudi Arabia’s dependence on oil revenues," says the Riyad Bank report/
"The upward trend also signals rising business confidence, showing a healthy environment to increase investment, job creation, and overall economic stability.
"Anecdotal reports suggested that new order volumes increased due to improving domestic demand, new clients and promotional effort."