Saudi Non-Oil Activity Hits a Four-Month High in June While Kuwait and Qatar Stay in Contraction
The Gulf’s non-oil economies ended June on sharply different tracks, according to the latest S&P Global purchasing managers’ surveys released on 5 July. Saudi Arabia’s non-oil private sector strengthened to a four-month high, Qatar’s contraction eased to its mildest pace in four months, and Kuwait remained under clear pressure with a fourth consecutive reading below the 50.0 growth line.
The headline split was significant. Saudi Arabia’s PMI rose to 53.3 in June from 52.8 in May, placing it 3.3 points above the neutral mark. Qatar improved to 47.6 from 45.9, narrowing its gap to the growth line to 2.4 points. Kuwait weakened to 46.4 from 47.2, leaving it 3.6 points below 50.0 and the weakest of the three. On a monthly basis, Qatar showed the largest improvement, up 1.7 points, Saudi Arabia gained 0.5 points, while Kuwait fell 0.8 points.
Saudi Arabia was the clear outperformer. The Riyad Bank Saudi Arabia PMI reached its highest level since February, supported by stronger new orders, resilient output and recovering domestic demand. Output rose sharply, with about 18 percent of surveyed firms reporting higher activity against only 2 percent reporting a decline, implying a positive output breadth of roughly 16 percentage points. New business increased at the fastest pace in four months, helped by project approvals, stronger customer demand and renewed sales activity after earlier postponements.
The Saudi reading also shows that the expansion is being driven mainly by domestic momentum rather than external demand. New export orders contracted for a fourth consecutive month, with firms citing regional logistics challenges and foreign competition. That contrast matters: the Saudi non-oil economy is still expanding, but the engine of growth is internal. This is consistent with the broader diversification push under Vision 2030, where domestic investment, services, construction, retail and project activity are carrying more of the cycle.
The pressure point in the Saudi survey was prices. Input costs rose steeply, completing what S&P Global described as the most pronounced quarter of cost inflation in 15 years. The drivers included higher fuel costs, freight charges, supplier prices and staff costs. Firms passed part of that pressure to customers, raising selling prices at the second-fastest pace in nearly six years. Around 22 percent of firms lifted output charges, compared with 8 percent cutting them, implying a net price-increase balance of about 14 percentage points. For Saudi businesses, the June signal is therefore positive on demand but more cautious on margins.
Kuwait moved in the opposite direction. The S&P Global Kuwait PMI fell to 46.4 in June from 47.2 in May, its fourth straight month below 50.0. Output and new orders both declined faster than in May, while new export orders fell at their steepest pace since the survey began in September 2018, excluding the April 2020 pandemic shutdown. Companies linked the pressure to regional trade and logistics disruption, weaker external demand and competition for scarce new business.
The weakness in Kuwait was broad enough to matter for the private-sector outlook. Employment declined for a fourth month, purchasing activity dropped at its quickest pace since April 2020, and inventories were reduced at the fastest rate on record. That combination suggests firms were not only facing weaker orders, but also managing cash flow and stock levels more defensively. The survey does not cover oil activity or public-sector finances, which remain central anchors for Kuwait’s economy, but it is a timely warning that the non-oil private sector remains exposed to external disruption and soft order books.
For Kuwait, the key analytical point is not that the whole economy is contracting, but that the private non-oil diversification channel is under strain. A PMI reading 3.6 points below the growth line, combined with falling employment and a record inventory drawdown, signals a retrenchment phase. If regional operating conditions improve, Kuwait has room for a second-half rebound, but the June data show that the private sector entered that period from a weak starting point.
Qatar sat between Saudi Arabia and Kuwait. The Qatar Financial Centre PMI, compiled by S&P Global, rose to 47.6 in June from 45.9 in May, a four-month high, but remained below the 50.0 threshold. Output stabilised after six consecutive months of decline, helped by recovering demand and a rebound in construction activity, while employment continued to edge higher. That makes Qatar’s survey less negative than Kuwait’s, even though it still points to contraction.
The constraint in Qatar was new business. New orders declined for a seventh consecutive month, meaning the improvement in the headline index was not yet a full demand recovery. Cost pressures also intensified, with input-price inflation accelerating for a record sixth month running to a 20-month high, while selling prices rose at their strongest pace since December 2022. Qatar is therefore closer to stabilisation, but not yet back in expansion. The July and August readings will be important to confirm whether June was the start of a recovery or only a slower contraction.
Taken together, the three surveys show a Gulf private-sector cycle that is uneven rather than uniformly weak. Saudi Arabia is expanding, Qatar is repairing, and Kuwait is still contracting. The spread between the strongest and weakest headline readings reached 6.9 points, from Saudi Arabia’s 53.3 to Kuwait’s 46.4, showing a meaningful divergence within economies often treated as moving together.
The common thread is inflation and logistics. All three economies were affected by regional tensions, supply-chain disruption or higher operating costs during the first half of the year. The difference is how much domestic demand offset those pressures. Saudi Arabia had enough internal momentum to remain in expansion. Qatar showed early signs of stabilisation. Kuwait remained the most exposed to weak external orders and operational retrenchment.
Why it matters: Non-oil PMIs are among the most timely gauges of private-sector momentum in MENA’s energy-exporting economies. They matter because diversification depends less on headline oil revenue and more on whether private firms are expanding output, hiring, investing and winning new orders. June’s readings show that the Gulf’s non-oil cycle is not moving in one direction. Saudi Arabia remains the region’s strongest signal, Qatar is approaching stabilisation, and Kuwait needs a recovery in orders and logistics conditions to regain momentum.
Outlook: The July surveys will be more important than the June releases because they will be the first full read after the mid-June easing in regional tensions. The key indicators to watch are whether Saudi Arabia can sustain growth while absorbing high costs, whether Qatar can move back above 50.0, and whether Kuwait’s export orders begin to recover. Persistent price pressure remains the main risk across all three, as it can squeeze margins, delay hiring and limit the strength of any private-sector rebound.
Sources: S&P Global; Riyad Bank Saudi Arabia PMI; S&P Global Kuwait PMI; Qatar Financial Centre PMI.
