Saudi Arabia's non-oil business activity remains robust in November on new order boost

Output also rose sharply in the Arab world's largest economy, driven by strong demand amid sustained economic momentum

The Riyadh skyline. The kingdom's PMI reading in November stayed well above the 50-point neutral mark that separates expansion from contraction. Reuters

Business activity in Saudi Arabia's non-oil private sector economy remained robust in November, driven by a sharp rise in client orders and output amid continued economic momentum in the kingdom.

The headline Riyad Bank purchasing managers' index reading dropped to 57.5 last month, from 58.4 in October, but remained well above the 50-point neutral mark that separates expansion from contraction.

The kingdom's non-oil private sector economy expanded despite an increase in raw material prices that drove up selling rates in November.

However, demand remained strong and new business inflows rose at their sharpest rate since June as the businesses surveyed cited an increase in new customers and greater investment spending.

“Firms anticipate a continuous increase in output, fuelled by a robust inflow of new projects,” Riyad Bank chief economist Naif Al-Ghaith said.

“Manufacturers, in particular, are highly optimistic about the next 12 months as they anticipate a favourable business climate.”

The wholesale and retail sectors also showed signs of strong expansion in November, in line with the overall positive sentiment in the kingdom’s non-oil private sector economy, Mr Al Ghaith said.

“This bodes well for Saudi Arabia's economic growth and suggests a favourable environment for businesses in various industries.”

New orders and output, the two largest contributors to the headline index, rose markedly in November, with new orders posting the highest reading in five months.

New business intake jumped considerably in November as companies surveyed cited improvements in market conditions, as well as a rise in customer numbers.

The uplift came despite a dip in foreign demand, as the latest data showed new export orders declining for the third time in four months.

Meanwhile, cost inflation across the kingdom's non-oil economy also climbed in November.

Input costs rose at their quickest pace since June 2022, led by increased purchase prices, especially in the construction sector.

Increased cost burdens led non-oil companies to lift selling charges in November for the first time in three months, according to the survey.

However, businesses remained optimistic about the growth prospects for the kingdom's non-oil private sector in the coming 12 months.

The outlook improved markedly in November to its strongest level since June amid “broad hopes that new business inflows will remain robust and drive higher activity”.

Saudi Arabia’s economy, which grew by 8.7 per cent last year, the highest annual growth rate among the world's 20 biggest economies, is expected to expand by 0.8 per cent in 2023, according to the International Monetary Fund.

The kingdom, which benefitted from the rally in crude prices last year amid the Ukraine war, has cut oil output in an attempt to stabilise oil market.

Its economy contracted by 4.5 per cent annually in the third quarter, dragged down by oil production caps.

However, the non-oil economy expanded by 3.9 per cent in the three months to end of September, according to the General Authority for Statistics data.

The IMF expects the kingdom's non-oil economic growth to remain close to 5 per cent in 2023, spurred by strong domestic demand.

Saudi Arabia projects even stronger growth for its non-oil economy, at 5.9 per cent this year, driven by the trade, hospitality and tourism sectors, the Ministry of Finance said in a preliminary budget statement in October.

Meanwhile, Egypt's non-oil private sector economy continued to soften in November as output projections dropped to a record low amid inflationary pressures.

Output and new orders both continued to decline last month, leading to the worst confidence levels among Egyptian non-oil private sector companies in more than 11 years.

The country's headline S&P Global Egypt PMI improved to 48.4 in November, up from 47.9 in October, staying well below the neutral 50 mark.

“Optimism in the Egyptian non-oil economy is eroding as we approach the end of the year, as economic challenges arising from the Russia-Ukraine war put additional pressure on costs and capacity at businesses,” said David Owen, senior economist at S&P Global Market Intelligence.

“While the resulting downturns in new business and output were not as severe compared to those seen at the start of the year, they are also showing no signs of letting up, stretching a sequence of decline that goes back to late 2021.”