Saudi Arabia's non-oil private sector economy continued to grow in August, driven by a sharp increase in new orders and a “robust” rise in employment as the kingdom advances its economic diversification strategy.
The seasonally adjusted Riyad Bank Purchasing Managers Index for the Arab world's biggest economy rose marginally for a second straight month to 56.4 in August, up from 56.3 in July, well above the 50 mark that separates growth from contraction.
Companies extended the hiring trend observed throughout much of 2025, driven by the creation of larger sales units, new projects and higher demand for skilled workers, the index found.
They also accelerated their purchasing activity last month, with a faster pace of growth compared to the previous survey period.
While activity growth has eased off from January's high of 60.5, the underlying trend for Saudi Arabia remains “firmly positive”, said Naif Al Ghaith, chief economist at Riyad Bank.
“Firms reported stronger new business inflows, supported by an uptick in export orders and continued growth in domestic demand. Many attributed the improvement to more active marketing efforts and a healthier client pipeline, particularly across the service sector,” he said.
“Employment trends remained broadly supportive, with firms continuing to expand their headcounts to meet current and expected demand. Although the rate of hiring eased from recent peaks [in May], it remained historically strong.”
Saudi Arabia is focusing on key sectors such as finance, tourism and technology as it diversifies away from oil dependence under its Vision 2030 strategy.
Last month, government data showed that the kingdom's industrial output in June rose to the highest level since April 2023 as the economy expanded, with oil and non-oil sectors maintaining growth momentum.
With business sentiment continuing to improve, companies cited steady pipelines, continuing projects and a supportive policy environment as reasons for optimism, Mr Al Ghaith said.
Meanwhile, non-oil private sector activity in the UAE also rose in August, with output growth and business confidence increasing in the Arab world's second-largest economy, driven by the fastest pace of activity in six months.
The seasonally adjusted S&P Global UAE Purchasing Managers' Index climbed to 53.3, from 52.9 in July, partly boosted by an expansion in output levels in the third quarter.
However, sales growth declined for the fourth consecutive month, bringing new orders to their lowest level since mid-2021, with expectations for softer demand in the second half of 2025, it said.
“The reduction came amid a softer improvement in supply chain conditions, which was also said to have disrupted markets,” said David Owen, senior economist at S&P Global Market Intelligence.
Input price inflation in the Emirates rose for the second straight month to reach its highest level since February, mainly driven by wages, as companies increased cost of living offerings and performance incentives, and a marginal rise in employment.
“Recruitment activity remained healthy and cost-of-living rises drove salary demands higher,” Mr Owen added.
Dubai's PMI, meanwhile, rose slightly to 53.6 in August from 53.5 in July, as businesses expanded their output at the sharpest rate in seven months.
This was underpinned by client sales and project activity, although total order books grew at a slower pace compared to July. “Input price pressures accelerated for the second month running, but remained less steep than those recorded across the UAE,” S&P Global said.
The UAE has introduced several economic, legal and social reforms in recent years to strengthen its business environment, boost foreign direct investment, attract skilled workers and provide incentives for companies to set up or expand their operations.
Non-oil private sector companies in the country reported their most confident levels since October last year as output expectations improved last month, S&P Global said.
“Several companies cited hopes that stable domestic economic conditions and strong client relationships would help to sustain growth in the year ahead,” it added.
In Egypt, non-oil private sector activity contracted last month, as output and new orders declined amid weak demand.
The S&P Global PMI for the Arab world's most populous country slipped to 49.2 from 49.5 in July, which was “closely linked” to weaker customer demand amid tepid economic conditions and concerns about persistent inflation.
Inflation in Egypt was still at 13.9 per cent in July but cooled for a second straight month having been brought down in 2025 compared to previous years' elevated levels.
Employment activity bucked the trend, rising for a second month as businesses continued to hire to boost their capacities and deal with backlogs.
“However, staffing gains were only mild, while firms remained reluctant to commit to new purchases, particularly as confidence in the year-ahead outlook remains weak,” Mr Owen said.
