Saudi Arabia’s non-oil private sector recorded a significant growth in sales in December, to end 2024 in a strong position.
According to the Riyad Bank Saudi Arabia Purchasing Managers’ Index (PMI) survey, by Standard and Poor’s (S&P) Global, the business environment has seen a remarkable improvement, driven by a significant increase in new orders, which led to the strongest sales growth of the year.
Sales Volume Increase
Owing to the rise in domestic demand and strong exports, the total sales volume of the non-oil private sector increased at the fastest pace in 12 months, resulting in strong upturns in business activity and inventories.
Saudi Arabia’s headline PMI recorded 58.4 in December 2024. The figure marks a significant improvement in operating conditions across the non-oil private sector, despite being slightly lower than a 17-month high of 59.0 in November.
The Riyad Bank Saudi Arabia PMI measures the average of 5 indices: New Orders (30%); Output (25%); Employment (20%); Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%). The PMI has remained above the 50.0 neutral mark since September 2020, underscoring the growth of the Kingdom’s non-oil sector.
Strong Performance
On this occasion, the Chief Economist at Riyad Bank, Naif Al-Ghaith, commended the growth in non-oil private sector, attributing it to efforts made under Vision 2030. He said: “Saudi Arabia’s non-oil private sector ended 2024 on a high note, reflecting the successful strides made under Vision 2030. The Purchasing Managers’ Index (PMI) recorded 58.4, underscoring the sector’s resilience and expansion.”
Al-Ghaith added that this strong performance is “a testament to the ongoing diversification of the economy, as outlined in Vision 2030, which aims to reduce reliance on oil and foster sustainable economic growth.”
Cost Inflation
Throughout December 2024, the cost inflation remained sharp due to strong input demand. However, an easing of job creation helped in reducing salary pressures for businesses. Moreover, the output charges increased, but the inflation rate slowed amid high competition and efforts to offload stocks.
In the light of this, Al-Ghaith said: “Despite challenges such as sharp cost inflation due to strong input demand, the sector has navigated these pressures effectively. December saw a notable increase in material costs, yet wage costs rose more moderately. This balance was aided by an easing in job creation, which helped soften salary pressures.”
He added that some firms responded to strong competition and elevated stock levels by reducing prices. This resulted in only a slight rise in average prices charged since November. “This competitive pricing strategy has helped mitigate inflationary impacts. Business expectations have also improved, reaching a nine-month high in December. Firms expressed optimism due to robust sales growth,” Al-Ghaith said.
Economic Conditions
According to the Riyad Bank Saudi Arabia PMI, non-oil businesses taking part in the survey indicated that strong economic conditions, higher client demand, and new marketing campaigns contributed to driving a notable upturn in new work in the final month of 2024.
On this matter, Al-Ghaith said: “The non-oil GDP is expected to grow by more than 4% in 2024 and 2025, driven by substantial improvements in business conditions. A significant rise in new orders has bolstered this growth, indicating increased market confidence and demand.”
An expansion in foreign market partly drove the strong momentum in sales. The December PMI survey indicated the sharpest rise in new export orders for 17 months.
“This surge is supported by elevated domestic demand and strengthening exports, which have propelled total sales volumes to their highest levels in a year. Consequently, business activity and inventories have experienced robust upturns, reflecting the sector’s capacity to meet and capitalize on rising demand,” Al-Ghaith noted.
Aligning with Vision 2030
The survey pointed to an improvement in business expectations to a nine-month high in December, with firms expecting an expansion in activity levels in 2025, owing to the robust growth in sales.
In the light of this, Al-Ghaith said that the growth on the non-oil sector is a direct outcome of Vision 2030. “Saudi Arabia’s non-oil private sector’s strong performance at the end of 2024 highlights the effectiveness of Vision 2030 in steering the economy towards diversification and resilience,” he said.
“With the non-oil GDP anticipated to continue its upward trajectory, the sector is well-positioned to contribute significantly to the Kingdom’s long-term economic goals. The focus on improving business conditions, boosting domestic and international demand, and managing inflationary pressures aligns seamlessly with Vision 2030’s objectives, setting the stage for sustained growth and prosperity in the upcoming years,” he added.
