Non-Oil Sector Expansion in Saudi Arabia Continues Amid Moderating Momentum and Strong Demand

Riyadh | EcoPulse24

Saudi Arabia’s non-oil private sector maintained a clear expansionary trajectory at the onset of 2026, despite signs of moderating growth momentum, according to Riyad Bank’s Purchasing Managers’ Index (PMI). The latest reading signals a transition from end-of-year peaks to a more balanced phase, with business fundamentals and demand generation remaining strong.

The PMI for Saudi industry eased slightly to 56.3 in January 2026 from 57.4 in December, marking a six-month low and slightly below its long-term average. Despite this dip, the index stayed firmly in expansion territory, underscoring the ongoing healthy growth of the non-oil private sector and the resilience of the local economy.

Business activity advanced robustly, supported by sustained local demand and improved business conditions in the Saudi market. New orders saw notable growth, indicating continued strength in domestic consumption and investment. External demand also strengthened, with export orders expanding at their fastest rate since October 2025, highlighting improved competitiveness of Saudi industrial exports and broader demand channels beyond the domestic market.

On employment, companies continued to bolster their workforce, though job growth slowed to its lowest in a year after peaking in October. This reflects a more cautious hiring approach in line with the softer overall momentum, without indicating operational strain or declining activity.

Conversely, firms faced ongoing cost pressures for the second consecutive month, including higher input, purchasing, and wage costs, driven by increased prices for metals, raw materials, fuel, and technology. While these factors posed operational challenges, they have not constrained expansion or curbed ongoing activity.

Business confidence improved compared to December, though it remained below its historical average, signaling cautious optimism for 2026. This balance between improved sentiment and strategic caution reflects companies’ awareness of global economic shifts, while continuing to rely on the strength of the local market.

This performance paints a cohesive picture for Saudi Arabia’s non-oil sector: momentum has moderated without halting expansion, demand drivers remain intact despite rising costs, and hiring decisions are more measured.

EcoPulse24 Analysis:
The PMI reading indicates the non-oil economy is shifting from rapid growth to a more mature, stable expansion. The sustained index level suggests the slowdown is a natural moderation after a period of strong growth, not a reversal of trend. Strong local demand and resilient exports support a positive outlook, while rising costs push companies to enhance efficiency and manage margins carefully. Improved but cautious business confidence signals readiness for measured expansion amid ongoing opportunities and calculated risks. Overall, the non-oil private sector remains a pillar of stability and growth for the Saudi economy in 2026, with a more balanced and disciplined expansion path.