Saudi Arabia’s non-oil private sector continued to grow in May, recording its fastest expansion rate in three months, driven by stronger domestic demand and more resilient supply chains, despite export pressures and cautious business sentiment.
The seasonally adjusted Purchasing Managers’ Index (PMI) issued by Riyad Bank rose to 52.8 points in May, compared to 51.5 points in April, according to S&P Global data. A reading above 50 points indicates expansion rather than contraction.
Output Records Fastest Growth in Three Months
Output accelerated to its strongest level in three months, following a slowdown seen in March after the onset of regional tensions. Companies linked the improvement to renewed contracts and stronger domestic demand. The new orders sub-index rose to 52.0 points in May, compared to 51.5 points in April, although it remained below its long-term average.
Exports Continue Declining for the Third Month
In contrast, export sales declined for the third consecutive month, affected by shipping disruptions, higher freight and fuel costs, geopolitical tensions, and intensified competition. The survey showed export declines eased slightly from April’s sharp downturn.
Supply Chains Improve with Greater Reliance on Local Suppliers
Supply chains improved in May as delivery times shortened for the first time in three months, driven by greater reliance on local suppliers. Backlogs of work rose for the eleventh consecutive month, albeit at a modest pace.
Companies Maintain Cautious Outlook Despite Activity Improvement
Naif Al-Ghaith, Chief Economist at Riyadh Bank, said: “Overall, the latest PMI reading supports expectations that Saudi Arabia’s non-oil economic growth will continue through the remainder of 2026.”
However, business sentiment remained subdued, with some companies expressing hopes for a market recovery next year, alongside continued concerns related to geopolitical tensions and inflation.
What Does This Mean for Businesses?
Survey results indicate continued momentum in non-oil activities, supported by stronger domestic demand, rising output and new orders, and stable supply chains. Backlogs of work increased for the eleventh consecutive month, albeit modestly, while exports continued to face pressure from shipping constraints, costs, and geopolitical tensions.
Absher Business supports companies in establishing and expanding operations across Saudi Arabia’s high-growth sectors while navigating regulatory requirements and market opportunities.
