Saudi Arabia’s non-oil private sector sustained its expansion in July 2025, although the pace of growth slowed compared to the previous month. According to the Riyad Bank Purchasing Managers’ Index (PMI) survey, the headline PMI dropped slightly to 56.3 in July from 57.2 in June, indicating continued growth but at a reduced rate.

The slowdown in output growth was notable, marking its weakest rate since January 2022. Companies cited increased market competition and a dip in customer demand as reasons for the moderation. Additionally, export orders declined for the first time in nine months, reflecting growing challenges in international markets.

Despite easing output, businesses continued to hire at a strong pace. Employment growth remained elevated following a 14-year high in June, as firms increased staffing to meet rising domestic demand. The survey indicated that many companies were still optimistic about their business outlook and were taking proactive steps to expand their operational capacities.

Cost pressures showed mixed trends. Input cost inflation eased slightly in July, but labor expenses remained high, driven by rising bonuses and efforts to retain talent in a competitive labor market. Businesses were more cautious in passing these costs to consumers, keeping output price inflation stable.

Business confidence dipped to its lowest level since July 2024, with firms expressing concern over global economic uncertainties and competitive pressures. However, sentiment remained in positive territory overall, supported by domestic demand and ongoing economic diversification projects under Saudi Arabia’s Vision 2030 strategy.

The PMI report follows a strong second quarter in the kingdom’s non-oil economy. In June, the PMI had reached 57.2, driven by new orders and a surge in hiring. Meanwhile, Saudi Arabia’s GDP expanded by 2.7% year-on-year in the first quarter of 2025, backed by a 4.2% rise in the non-oil sector, despite a 1.4% decline in oil sector output.

The International Monetary Fund recently revised Saudi Arabia’s 2025 growth forecast upward to 3.5%, citing strong performance in the non-oil economy and the government’s commitment to large-scale development initiatives.

The PMI data reflects Saudi Arabia's steady progress toward diversifying its economy, even as short-term challenges in exports and price pressures persist. With strong domestic momentum and ongoing reforms, the kingdom’s non-oil private sector continues to be a key pillar of its economic transformation.