Kuwait PMI Rises to Three-Month High as Contraction Eases in May
Kuwait’s non-oil private sector showed early signs of stabilization in May, although business conditions remained under pressure as the headline Purchasing Managers’ Index stayed below the neutral 50.0 level.
The latest S&P Global PMI data for Kuwait showed that the headline index rose to 47.2 in May from 46.3 in April, reaching its highest level in three months. The monthly improvement of 0.9 points signals that the pace of contraction eased, but the index remained 2.8 points below the neutral threshold, meaning the sector was still contracting overall.
The improvement suggests that April’s sharper downturn moderated in May. Output and new orders continued to decline, but at a much weaker pace than in the previous month. This points to early signs of demand stabilization, supported in some cases by stronger advertising activity and promotional offers that helped improve local demand.
Domestic Demand Improves, Export Orders Remain Weak
The key positive signal in the May data was the slower decline in production and new business. While companies were still facing difficult operating conditions, the pace of weakness was less severe than in April.
However, the external picture remained weak. New export orders continued to fall rapidly, reflecting the impact of regional conflict on international demand. This divergence is important: domestic demand showed tentative signs of improvement, while foreign demand remained under pressure.
The result is a mixed but slightly better operating environment. Kuwait’s non-oil private sector is not yet back in expansion territory, but the latest PMI movement indicates that the downturn has become less intense.
Employment Falls for Third Consecutive Month
Companies continued to reduce staffing levels in May, marking the third consecutive monthly decline in employment.
The reduction was described as modest, reflecting the fact that existing capacity remained sufficient to handle current workloads. With demand still weak, firms had limited need to expand headcount.
Lower employment also contributed to a decline in staff costs. This partly offset broader input cost pressures, but it also highlights that companies remain cautious about hiring while business activity is still below normal levels.
Purchasing Activity and Inventories Decline Sharply
One of the clearest signs of caution came from purchasing and inventory behavior.
Companies reduced purchasing activity at the fastest pace since April 2020. At the same time, stocks of purchases recorded their sharpest decline since the survey began in September 2018.
This is a significant signal. It suggests that companies are running lean, avoiding excess inventories and responding defensively to uncertain demand conditions. However, a sharp inventory drawdown can also create room for a quicker rebound in purchasing if demand begins to recover.
Lower demand for inputs allowed suppliers to reduce delivery times for the first time in three months. In other words, weaker purchasing pressure helped ease some supply chain constraints.
Cost Pressures Return
May also saw a renewed increase in total input costs for the first time since the start of the regional conflict.
The increase was driven by higher purchase prices and greater company spending on advertising, rent and spare parts. However, the overall rate of cost inflation remained relatively low.
Despite only modest cost pressure, firms continued to raise selling prices. Output price inflation has now continued for 15 consecutive months, with the pace broadly unchanged from April.
This matters because even in a contracting environment, companies are still passing part of their cost burden to customers. That suggests some pricing power, but persistent selling price inflation may also limit the speed of demand recovery if consumers and businesses remain price sensitive.
Business Confidence Improves
The most encouraging part of the May report was the rebound in business confidence.
As the pace of output decline eased, Kuwaiti companies became more optimistic about the future outlook. Confidence rose sharply to its highest level in three months.
According to S&P Global Market Intelligence commentary, although some firms remain concerned about the continuing impact of the conflict, improved optimism raises hopes that Kuwait’s non-oil private sector could return to growth in the coming months if operating conditions normalize.
Numeric Analysis
The headline PMI rose by 0.9 points month-on-month, from 46.3 to 47.2. This is a positive move, but the index still remained below 50.0.
The gap to the neutral level narrowed from 3.7 points in April to 2.8 points in May. That means about 24% of the previous month’s gap to neutrality was closed during May.
However, the reading still signals contraction. A move from 46.3 to 47.2 should therefore be read as a slower downturn, not a full recovery.
Other indicators also show caution. Employment declined for a third month, purchasing activity fell at the fastest pace since April 2020, and inventories recorded their sharpest drop since the survey began in September 2018. These figures suggest that companies remain defensive despite improving confidence.
Outlook
Kuwait’s May PMI report points to an economy that is still under pressure, but no longer deteriorating as sharply as before.
The improvement in the headline index, slower declines in output and new orders, and stronger business confidence all suggest that the non-oil private sector may be entering a stabilization phase.
However, risks remain. Export demand is still weak, companies are reducing staff, purchasing activity has fallen sharply, and selling prices continue to rise.
The key takeaway is that Kuwait’s non-oil private sector is showing early signs of improvement, but the recovery remains incomplete. A sustained move above the 50.0 PMI threshold will be needed before the data can confirm a return to expansion.
For now, the May reading should be viewed as a cautious positive signal: contraction is easing, confidence is improving, and the worst of the April downturn may have passed. But stronger new orders, improved export demand and a recovery in purchasing activity will be needed to confirm a broader turnaround.
Source note: Data used in this article is based on S&P Global PMI data for Kuwait and S&P Global Market Intelligence commentary.
