Saudi Arabia's non-oil private sector growth moderated in December, with the Purchasing Managers' Index falling to 57.4 from 58.5 in November, marking the slowest expansion in four months, Riyad Bank and S&P Global reported on January 5.

The index remained well above the 50.0 no-change threshold and slightly stronger than its long-run average of 56.9. Output levels increased markedly during December, though the upturn was the least pronounced in four months, with firms citing increased new business, work on existing projects and heightened investment spending.

New orders received by non-oil companies rose sharply in December, although the pace of growth eased to its softest since August. Panellists remarked on improving economic conditions, the acquisition of new clients, the initiation of new contracts and successful marketing campaigns. However, some firms expressed concerns about market saturation, which contributed to a slight easing in overall momentum.

Employment growth remained strong and similar to November's pace, though softer than the peak observed in October. Despite adding to labour capacity, companies reported a further increase in their work-in-hand in December, with the rate of backlog accumulation reaching its highest since July.

"Saudi Arabia's non-oil private sector closed the year with a solid expansion, as the headline PMI eased to 57.4 in December, with activity continuing to expand despite some loss of momentum," said Naif Al-Ghaith, Chief Economist at Riyad Bank.

Input prices paid by non-oil firms increased again in December, with the inflation rate accelerating due to a faster rise in purchase costs. Wage pressures eased to their lowest in 20 months. Most firms opted to pass their higher costs onto customers, leading to a rise in output prices.

"On the cost side, inflationary pressures increased, led by a rise in input and purchase prices, while staff cost inflation remained contained," Al-Ghaith said.

Purchasing activity recorded a strong expansion at year end, with the latest upturn the fastest in three months and above the series trend. This contributed to a sharper rise in overall input stocks compared to November.

Output expectations across the non-oil sector weakened in December, with the degree of optimism the lowest since July and much less upbeat than the series long-run average. Positive forecasts were partly dampened by concerns about rising competition.

"Looking ahead, business sentiment softened despite remaining positive. The Future Output Index stayed above the neutral mark, indicating expectations of growth into 2026, but fell to its lowest level since July, reflecting more cautious confidence," Al-Ghaith said.

New export orders increased only marginally compared to the previous month, marking the fifth consecutive month of growth but the weakest rise in this sequence.