Saudi point-of-sale transactions on course for record high

Alamy via Reuters

• Point-of-sale transactions rising
• Predicted 2024 value SAR660bn
• ‘Consumer confidence remains high’

Growing consumer confidence should lift the value and volume of Saudi Arabia’s point-of-sale transactions to record highs this year, the latest central bank data indicates.

Point-of-sale transactions are typically made in person using cash, credit or debit cards, but also include online purchases. As such, point-of-sale data can be interpreted as a proxy for the retail sector.

In the first four months of 2024, Saudi Arabia registered 3.2 million point-of-sale transactions with a combined value of SAR220 billion ($58.7 billion), according to the Saudi Arabian Monetary Agency (Sama).

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Extrapolating these figures would give full-year 2024 totals of about 9.7 million transactions and SAR660 billion of sales. That would be 8 percent higher than the number of sales and 7 percent higher than the sales value in 2023, AGBI calculations show.

Such figures would extend a trend of decelerating growth. However, the projected number of transactions for 2024 is more than quadruple the figure for 2019 while the sales value increase is about 2.3 times.

The rise in spending reflects growing consumer confidence. Ipsos’s Saudi consumer sentiment index hit 72.7 in May, up from 71.9 in April.

The market research company found that 87 percent of Saudi respondents expect the economy in their local area to be stronger in six months’ time and 95 percent believe the country is heading in the right direction.

“Consumer confidence remains high,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. “Saudi residents are spending more and they’re spending their money domestically. Tourism spending is also increasing.

“Saudi’s consumption story looks strong, despite higher interest rates and despite household borrowing for consumption purposes weakening versus a year ago – people are spending, but they’re not borrowing to do so.”

Saudi Arabia’s interest rates track US rates because of the riyal’s dollar peg. The Federal Reserve's benchmark rate is at a 23-year high of about 5.3 percent, up from near-zero in early 2022.

Bank lending to Saudi Arabia’s wholesale and retail sector rose 11 percent year on year in March, according to a report by Abu Dhabi Commercial Bank. This increase points to “a healthy private consumption backdrop”, the report said.

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The kingdom’s non-oil sector is expansionary, according to the latest Riyad Bank Saudi Arabia Purchasing Managers’ Index. May’s PMI was 56.4, down from 57.0 in April. The index covers five variables: new orders, output, employment, suppliers’ delivery times and stocks of purchases. A figure above 50 indicates an increase on the preceding month.

“New orders placed at non-oil businesses also rose steeply during May, albeit at the least pronounced pace in just over two years,” the PMI report said.

Participating companies expanded their workforce last month after a decline in April – the first in more than two years. “Staffing growth was mostly linked to higher workloads and efforts to reduce outstanding orders.”