Growth in Saudi Arabia’s non-oil private sector cooled slightly in February, falling to the weakest monthly reading in nine months according to the seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers’ Index (PMI). The index registered 56.1 in February, down from January’s 56.3, but it remained comfortably above the 50.0 level that separates expansion from contraction.
The survey highlighted resilient underlying demand. The new orders sub-index held steady at 61.8, matching the previous month and signalling continued strong demand across the non-oil private economy. Businesses in the survey reported ongoing output growth and a pronounced increase in hiring, with employment gains accelerating to a four-month high as firms responded to stronger sales and a build-up of backlogs.
"This performance was driven by robust domestic demand and a steady flow of new project approvals," said Naif Al-Ghaith, Riyad Bank’s chief economist.
Despite the favourable demand picture, cost pressures were evident. The survey recorded staff cost inflation at its highest level since the Riyad Bank PMI began in August 2009, pointing to rising labour expenses for companies in the non-oil sector.
The report also noted that Iran’s retaliatory strikes across the Gulf since Saturday have produced the most widespread business disruption in the region since the COVID-19 pandemic. Those incidents have led to airport closures, halted port operations and sent shockwaves through financial markets, according to the survey commentary.
Against this backdrop of heightened regional risk and firming input costs, JPMorgan on Monday trimmed its 2026 non-oil growth forecast for the Gulf region by 0.3 percentage points and cut its 2026 forecast for Saudi Arabia by 0.2 percentage points. The bank cautioned that its figures were initial estimates and subject to significant uncertainty.
Expansion of the non-oil sector remains a stated priority of Saudi Arabia’s economic diversification plans. The February PMI data indicate that domestic demand and project approvals are supporting that objective, even as geopolitical tensions and rising labour costs introduce new headwinds for firms operating outside the oil sector.
Summary
Saudi Arabia’s non-oil private sector grew at a slower pace in February, with the Riyad Bank PMI slipping to 56.1 from 56.3 but staying above the 50.0 growth threshold. Strong new orders and accelerating employment contrasted with rising staff cost inflation, and regional security incidents disrupted transport and financial activity.