The non-oil private sector in Saudi Arabia continued to record growth during October, with the pace of commercial activity accelerating and production improving, despite the Purchasing Managers’ Index declining to 54 points, compared to 55.3 points in September, according to Riyad Bank index data issued by S&P Global.
The main index, seasonally adjusted, remained above the neutral level of 50 points for the seventh month in a row, indicating continued improvement in operating conditions in the non-oil sector. Although it was lower than the September reading, which recorded the highest level in seven months, the October reading was the second highest level for the index since February.
The data showed production growth accelerating to a strong pace compared to the previous month, supported by improved underlying demand and companies intensifying sales and marketing efforts. New orders also continued to rise, albeit at a slower pace than in September, and remained below the historical series average.
Demand growth depended mainly on the local market, at a time when export orders declined for the eighth month in a row, and at a faster pace. The companies participating in the survey reported that shipping disruptions, high transportation and insurance costs, in addition to competitive conditions in the markets, affected foreign sales. About a quarter of companies indicated a decrease in export orders during October.
In the labor market, companies continued to increase the number of their employees for the fourth month in a row, but the pace of hiring was modest and slower than recorded in September. The volume of outstanding work also increased slightly for the second month in a row, in light of increased sales and some delays associated with supplier deliveries.
In terms of supply chains, suppliers’ delivery times have only improved to a limited degree, the weakest since April, with continued disruptions in sea routes and their impact on deliveries. This prompted some companies to increase their reliance on local sources to secure their needs for production requirements.
Cost pressures
On the other hand, cost pressures escalated at the beginning of the last quarter of the year, as the prices of corporate purchases rose at the fastest pace in six months, driven by increased costs of shipping, insurance, raw materials, and energy. Staff cost inflation also registered its fastest pace since February.
Despite the rise in input costs, the rate of increase in selling prices slowed to the lowest level in nine months, with companies resorting to offering greater discounts in light of the intensification of competition, although prices continued to rise at a strong pace.
Commenting on the results, Nayef Al-Ghaith, chief economist at Riyad Bank, said that the non-oil private sector showed resilience during October, supported by sustainable domestic demand, improved commercial activity, and continued expansion in employment. He pointed out that the index remaining above the 50-point level reflects the continuing improvement in operating conditions, despite its decline from the previous month’s level.
He added that the acceleration of production reflects the ability of Saudi companies to respond to local demand, with the support of operational efficiency, marketing initiatives, and increased sales activity, pointing out that new orders have maintained strong growth, although demand has become more selective.
Al-Ghaith pointed out that the continued increase in employment, inventory accumulation, and purchasing activity reflects the readiness of companies to meet demand, while expectations regarding production during the next year remain positive to a limited degree, but below the general average recorded during the period of monitoring the index.
The US dollar moved near its lowest levels in a month on Tuesday, with investors cautious about tensions between the United States and Iran, and anticipating the results of the US midterm elections, while the Australian dollar fell following the decision of the Central Bank of Australia to raise interest rates as expected.
In energy markets, oil prices rose slightly during early Asian trading, as Brent crude futures rose 0.5 percent to $105.25 per barrel, recovering part of the losses of more than 7 percent recorded on Monday.
This rise came after the United States carried out strikes that it described as “defensive” on the Iranian island of Qeshm, which limited the optimism that prevailed in the markets earlier regarding talks between the two sides to reach a settlement to end the war that has been ongoing for eight months.
At the same time, the decline in shares of artificial intelligence companies showed no signs of abating, which weakened investors' appetite for risk and provided some support to the dollar. Concerns surrounding the US midterm elections also contributed to enhancing the currency's appeal as a safe haven.
The dollar index, which measures the performance of the US currency against a basket of major currencies that includes the euro and the yen, rose slightly to 101.81 points, after falling on Monday to its lowest level in a month.
Sim Moh Siong, foreign exchange strategist at OCBC Bank, said in a research note that the decline in energy prices is reshaping the dynamics of currency markets, while fears related to artificial intelligence and the risks of the US elections reinforce expectations that the dollar will continue to receive support.
Among other factors that supported the US currency, the Chinese yuan declined in foreign markets, heading towards recording its largest daily decline since May, after it fell by 0.34 percent to 6.67 yuan against the dollar.
This decline came after the People's Bank of China announced an increase in the mandatory foreign exchange reserve ratio, in a move that would tighten the liquidity available in dollars and slow the pace of the Chinese currency's recent gains.
On the other hand, the euro stabilized at $1.1182, while the Japanese yen recorded 157.92 against the dollar, with trading largely stable due to an official holiday in Japan.
A new round of central bank decisions
This week, markets are awaiting monetary policy decisions issued by a number of central banks, including Australia, Britain, Norway, and Sweden.
On Tuesday, the Reserve Bank of Australia raised its key interest rate by 25 basis points to 4.85 percent, as markets had expected, reaching its highest levels since December 2008.
Thus, the total increases approved by the bank during the current year, through five decisions, reach 125 basis points.
Investors had strongly suggested raising interest rates, after monetary policy makers warned of upward risks to core inflation, which reached 3.7 percent, exceeding the central bank’s target range of between 2 and 3 percent.
Despite the decision to raise interest rates, the Australian dollar fell by 0.35 percent to 0.6974 US dollars, following the announcement of the decision. The New Zealand dollar settled at $0.5616.
In Britain, the pound sterling stabilized at $1.3401, after the latest PMI data showed that British factories began the last quarter of 2026 with the strongest production growth in more than two years.
Economists polled by Reuters expect the Bank of England to raise the key interest rate to 4 percent, compared to 3.75 percent currently, in the first increase since August 2023, when inflation was exceeding three times the bank’s target of 2 percent.
