Saudi Arabia's non-oil private sector saw strong growth in June, driven by increased activity in construction and tourism, according to a survey by Riyadh Bank. The survey, which measures the performance of the non-oil sector, showed that the Purchasing Managers' Index (PMI) rose to 59.6 in June, from 58.5 in May, indicating a faster expansion of business activity. A PMI reading above 50 indicates growth, while below 50 signals contraction.
The output sub-index, which tracks the change in production or service levels, surged to 66.1 in June, from 61.7 in May, reaching the highest level since March 2015. The survey attributed this to strong demand and positive market conditions, especially in the construction and tourism sectors. The new orders sub-index also rose to 69.5 in June, from 67.3 in May, marking the highest level since September 2014.
The survey also showed that employment levels increased for the third consecutive month in June, as firms hired more staff to cope with the rising workload. However, this also led to higher staff costs and inflationary pressures, as well as increased prices for construction materials.
The Saudi government is investing billions of dollars into developing non-oil sectors of the economy, such as tourism, entertainment, culture, and sports, as part of its Vision 2030 plan to diversify its revenue sources away from oil and create more jobs for its young population. The survey reported that business confidence remained positive in June, as firms expected further improvement in demand and economic conditions.
Naif Al-Ghaith, the chief economist at Riyadh Bank, said: "The kingdom's non-oil private sector remained on a steeply upward growth trajectory by the end of the second quarter, as inflows of new business accelerate, particularly in construction and tourism activities. Yet this economic spike may contribute to increased inflationary pressures alongside reported increase in staff and construction material costs".
