Riyadh - Mubasher: Saudi Arabia’s headline seasonally adjusted Purchasing Managers’ Index (PMI) dropped sharply to 48.8 last March from 56.1 in February 2026, according to data released by Riyad Bank and S&P Global.
This reading marked the first deterioration in non-oil business conditions in over five-and-a-half years, as the index fell below the neutral 50.0 threshold.
The 7.3-point decline in the index compared to the previous month marked the second-steepest since the survey began in 2009.
Regional conflict significantly impacted business activity and new orders, leading to the first contraction in both indices since August 2020.
Firms cited a pause in new projects and delayed client spending decisions amid heightened uncertainty.
New business declined due to weaker domestic demand and a sharp drop in export orders, which recorded their fastest contraction in nearly six years, reflecting regional instability.
Likewise, supply chains came under pressure, as delivery times lengthened for the first time since August 2021, driven by shipping delays and rising transport and fuel costs. In this regard, the backlogs of work increased at the fastest pace since July 2018 despite weaker order inflows.
In response to softer demand, firms reduced their purchasing activity, although the decline was moderate following February’s strong expansion.
The inventory levels continued to rise, indicating limited efforts to scale back stock holdings.
Employment growth persisted in March, but hiring slowed considerably compared to February. Some companies increased staffing to manage supply chain disruptions and meet workforce requirements.
On the price front, input cost inflation eased to the softest level in a year, largely due to slower wage growth after February’s record high. However, higher fuel prices and freight charges continued to push up purchasing costs and selling prices.
Looking ahead, business expectations weakened to their lowest level since June 2020 but remained in positive territory. While firms expressed concerns over the short-term impact of geopolitical tensions, they maintained optimism supported by government spending, infrastructure projects, and long-term demand prospects.
Naif Al Ghaith, Chief Economist at Riyad Bank, said: “The Saudi Arabia PMI moderated to 48.8 in March from 56.1 in February, reflecting a temporary adjustment following a strong expansion phase.”
“The softer reading was mainly driven by a pause in new orders as clients adopted a more cautious stance, while export orders saw a notable pullback,” Al-Ghaith noted.
The economist added: “Despite supply chain challenges and rising costs, employment growth and backlog accumulation signal underlying demand remains intact, with medium-term growth prospects supported by Vision 2030 initiatives.”
