Saudi Arabia’s non-oil private sector contracted in March as the Middle East conflict disrupted supply chains, triggering a sharp fall in new orders and marking the first deterioration in business conditions in nearly six years, according to a recent survey.
The Riyad Bank Saudi Arabia PMI dropped to 48.8 in March from 56.1 in February, falling below the 50 mark that separates growth from contraction.
According to Naif Al-Ghaith, the decline was largely driven by a slowdown in new orders as clients became more cautious. Export demand weakened notably, with some firms reporting a temporary dip in cross-border activity.
Both business activity and new orders were adversely affected by the regional conflict, with their respective indices slipping into contraction territory for the first time since August 2020. Companies noted that projects were being postponed and spending decisions delayed until there is greater clarity on the situation.
Export orders were hit particularly hard, recording their steepest drop in almost six years.
At the same time, supply chain disruptions led to longer delivery times, as shipping delays and higher fuel costs strained logistics. This resulted in the sharpest increase in backlogs since July 2018.
Cost pressures showed some easing, with overall input prices rising at the slowest pace in a year as wage growth moderated from February’s peak. Still, higher fuel prices and freight charges pushed up purchasing costs and, in turn, selling prices.
Business confidence weakened significantly, with output expectations falling to their lowest level since June 2020, although firms remained generally optimistic about the future.
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