Saudi Arabia bucks slowdown while war weighs on Gulf PMI

• Saudi private sector outpaces peers
• UAE business growth hits five-year low
• Conflict dents demand in Kuwait and Qatar

Saudi Arabia’s non-oil private sector expanded further in June, while businesses in the UAE, Kuwait and Qatar reported disruption from the Iran war, weaker demand and higher costs, according to the latest monthly survey results.

Non-oil output in Saudi Arabia increased sharply over the month and new business growth hit a four-month high, supported by recovering domestic demand, a report by Riyad Bank said.

The seasonally adjusted purchasing managers’ index (PMI) rose further above the 50 neutral mark to 53.3 in June, up from 52.8 in May and the highest in four months. A PMI score above 50 represents growth, while a reading below 50 indicates contraction.

“Business sentiment continued to strengthen, with firms reporting their highest level of optimism since January,” said Naif Al-Ghaith, chief economist at Riyad Bank.

Cost pressures remain elevated and there are challenges in export markets but businesses appear to be managing them without materially affecting activity or confidence, he said, pointing to the non-oil economy’s resilience and companies successfully balancing profitability with sustained business expansion.

United Arab Emirates

The UAE’s non-oil private sector reported its weakest expansion in more than five years during June as it faced further headwinds, S&P Global said in a report.

The headline PMI for the UAE fell from 52.6 in May to 50.8 in June.

Despite accelerating to a three-month high, the UAE’s new business growth remained well below its historical average, as customers delayed spending decisions. The weak tourism sector and elevated price pressures also dampened demand.

The UAE’s labour market contracted for the first time in over four years, the sharpest since August 2020.

“The robust nature of the drop in employment underscores the hit to firms from the double whammy of soft client demand and rising cost burdens,” said David Owen, principal economist at S&P Global Market Intelligence.

Kuwait

The Iran conflict and rising prices caused further challenges for Kuwaiti non-oil companies, as output and new orders fell more quickly than in May, S&P Global Kuwait said in a report.

The headline PMI remained below 50 in June, at 46.4 versus a reading of 47.2 in May.

The regional conflict and issues around the border with Iraq had a particular impact on new export orders in June. Moreover, excluding the Covid-19 lockdown in April 2020, the reduction in new business from abroad was the steepest since the survey began in September 2018.

Employment scaled back for the fourth month in a row, the report said.

• The GCC’s economies in numbers
• IMF predicts slower-growing but resilient Saudi economy
• UAE non-oil growth subdued as headwinds buffet Kuwait and Egypt

Qatar

Qatar’s PMI rose to a four-month high of 47.6 from 45.9, signalling that business conditions were still deteriorating but at a slower pace, as output stabilised after six months of decline.

Trevor Balchin, economics director at S&P Global Market Intelligence, said new orders continued to fall, reflecting disruption and uncertainty, but the decline was the slowest since February.

Companies were much more optimistic about the 12-month outlook for a US-Iran peace deal, he said.