DUBAI: The expansion in non-oil business activity in Saudi Arabia, the world’s top oil exporter, eased further in August after output growth slowed sharply, a business survey showed on Tuesday, as concerns over market competition weighed on confidence.
The seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers’ Index fell for a second consecutive month, dropping to 56.6 from 57.7 in July, although remaining firmly in growth territory.
It was the lowest reading since September 2022. Overall output growth slowed sharply, with the subindex dropping to 59.1 - the lowest level since January last year - from July’s 66.0, while the new business expansion also eased.
The subindex for new orders slipped almost three points to 60.2 with greater competition and weaker export sales weighing on new business, the survey said.
Oil production cuts and lower crude prices this year will temper Saudi Arabia’s economic growth, which hit 8.7% in 2022, but non-oil growth is expected to support the economy as it seeks to diversify away from hydrocarbons and expand the private sector.
“The Kingdom’s non-oil activities have managed to expand despite the continuous challenges arising from input prices and the high interest rates,” said Naif Al-Ghaith, Riyad Bank’s chief economist.
“The non-oil economy has not displayed much of the tighter monetary policy symptoms,” Al-Ghaith said, adding that reforms and projects undertaken under Saudi Arabia’s Vision 2030 economic transformation plan have spurred activity and created jobs.
However, the latest PMI survey also showed that business confidence, while remaining positive overall, slipped to its lowest level since June 2020, with competitive pressure weighing on sales according to some respondents.
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