Saudi Arabia’s non-oil private sector strengthened in May, as the latest Riyad Bank Saudi Arabia PMI showed output increasingly sharply as domestic demand improved and supply chains stabilised. 

However, new order growth remained modest amid another steep contraction in exports, whilst business optimism was subdued, said a report.

Elevated input costs kept output prices rising sharply, although overall inflationary pressures eased slightly from April. 

The headline PMI rose to 52.8 in May, from 51.5 in April, to signal a stronger improvement in business conditions. However, the index remained much weaker than its long-run average of 56.8, as some survey responses suggested that ongoing regional geopolitical tensions had restrained growth.

The headline figure is the seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers’ Index (PMI). The PMI is a weighted average of the following five indices: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%).

 Non-oil private sector activity rose at the fastest pace in three months during May, signalling a solid recovery from March’s downturn. Firms attributed the rebound to normalising working conditions after earlier conflict-related disruptions, the revival of suspended contracts and stronger domestic demand. 

Compared with the strong uplift in output, demand conditions still appeared somewhat subdued in May. Overall new orders increased, but the pace of expansion was modest and well below the long-run trend, with improved economic conditions and restarted projects offset by delayed client spending and strong competitive pressures. 

External demand also remained weak, as new export orders declined sharply for a third consecutive month, weighed down by shipping disruptions, higher freight and fuel costs, and geopolitical tensions, the report said.