Non-oil business activity in Saudi Arabia grew at its weakest rate in two years last month, a survey showed on Monday, as a sharp slowdown in new order growth indicated weakening demand. The seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers’ Index stood at 55.4 in January, down from 57.5 in December, and the lowest reading since January 2022.
The subindex for Output dropped to 58.1 last month, from 61.0 in December, and remained firmly in growth mode, but the pace of expansion in new orders dropped to 60.5 last month, from December’s 68.3 reading, signalling weakness in demand momentum.
The softening in the pace of new order growth was attributed in part to increased competition affecting order books, as well as a contraction in export orders, the fourth drop in six months, on lower demand and weaker economic conditions, among others. Purchasing costs rose at the fastest pace since May 2012, the survey showed, with some respondents citing higher shipping costs on the back of attacks in the Red Sea as a reason, as well as increased material costs and more supply chain risk.
“It’s clear that the non-oil economy has continued to grow, despite challenges stemming from rising costs and interest rates,” Naif Al-Ghaith, chief economist at Riyad Bank said. “Despite cost increases, output prices have remained low, signalling a high level of competitiveness in the market.” The level of business confidence about future activity slowed in January, with some respondents concerned over weakening demand and inflationary pressures over the next 12 months.