Riyadh December 5 2023: Businesses in the Saudi Arabian non-oil economy signalled a notable increase in employment during October, according to the Riyad Bank Saudi Arabia Purchasing Managers’ Index™ (PMI®).
The headline PMI rose for the second consecutive month in October, picking up to 58.4 from 57.2 in September. The reading was the highest since June and indicative of a substantial upturn in the health of the Saudi Arabian non-oil private sector.
A stronger rise in new business supported a marked expansion in activity, leading to the greatest improvement in job numbers in exactly nine years.
Stronger labour market conditions underlined a faster increase in wages, adding to input cost pressures as purchase price inflation also accelerated. Nevertheless, companies reduced their selling charges for the second month in a row amid further reports that strong competition was eroding market share.
Business activity continued to grow at a marked rate at the start of the fourth quarter, in response to higher client orders and strengthening economic conditions. Companies also reported a sharp increase in new business intakes, with the rate of expansion improving to a four-month high. Growth in output and new business remained widespread across the manufacturing, construction, wholesale & retail and services sectors.
The latest survey data most notably indicated a steep uplift in hiring activity across the non-oil private sector. Surveyed businesses highlighted that strong demand and robust output expectations led to a need for greater staffing numbers. Subsequently, overall employment rose to the sharpest degree since October 2014.
Similarly, non-oil companies reported a faster expansion in purchasing activity in October, marking the first pick-up in the rate of growth for four months. The substantial uplift in input buying was mainly due to higher client orders, which also led to a sharp increase in stocks of purchases. Inventory growth was helped by a shortening of average input lead times, albeit one that was not as marked as in September.
Robust hiring meant that non-oil firms in Saudi Arabia were able to deplete their work-in-hand at the start of the fourth quarter. Moreover, backlog volumes decreased at the sharpest rate since August 2022. As well as greater staffing, firms mentioned that supportive government policies and subsequent improvements in the ease of doing business had helped them to reduce backlogs.
On the flip side, a heated labour market fuelled enhanced wage pressures in October. Combined with a faster increase in purchase prices, the pace of overall input cost inflation ticked up to the joint-fastest in over a year. Nonetheless, price discounting continued for the second straight month as firms highlighted competitive pressures, resulting in the strongest drop in output prices since May 2020.
Looking ahead, firms maintained a solid degree of confidence regarding future activity in October, with optimism often attributed to higher demand and robust order pipelines. The degree of optimism eased slightly, however
