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Saudi Arabia and the UAE have been investing billions of dollars in steering a sustainable post-oil future. And its efforts to develop a new engine to drive their prosperity are paying off as non-oil private sector activity in Saudi Arabia and UAE remains strong, indicating continued growth.

The Riyad Bank Saudi Arabia Purchasing Managers’ Index (PMI) reading reached 57.7 in July, signaling strong underlying business conditions. Similarly, UAE’s PMI was 56.0 in July.

Although both countries saw a drop from June’s reading, yet remained well above the 50.0 no-change mark, meaning they are still in the growth phase, and signaled strong underlying business conditions. 

The latest reading was also higher than the long-run survey average, and the strong performance by the non-oil private sector companies in July reflects robust domestic economic conditions.

Meanwhile, Saudi Arabia posted revenues of $83.91 billion in the second quarter of 2023, according to data released by the Finance Ministry on Thursday. The second quarter saw a 13% surge in non-oil revenue. The long-term business expansion plans and efforts to boost operating capacity in July were reflected in the rise of employment numbers for the sixteenth month.

Business activity growth was similar to that seen in the previous month, with the fastest rates of output expansion reported by manufacturing and construction companies. 

“Future business sentiment remained robust in July, which typically reflects confidence regarding the domestic economic outlook and an anticipated rise in customer demand,” said Naif Al-Ghaith, Chief Economist at Riyad Bank.

The UAE’s business conditions remained strong in the third quarter. The rate of activity growth was still considerable, with about 30% of survey respondents reporting an increase in output from the previous month. In contrast, less than 2% reported a decrease in output.

A slight rise in employment was recorded due to an overall sharp increase in new orders. 

Cost pressures eased in July as the rate of input price inflation softened to a three-month low and was only marginal, which was reflected in lower commodity prices and lowered salary pressures.

“At the outset, the July findings signaled that the UAE non-oil sector will continue on its expansion path in the second half of this year,” said David Owen, Senior Economist at S&P Global Market Intelligence.