Saudi Arabia’s non-oil private sector PMI at 55, leading the Gulf region – S&P Global

RIYADH: Saudi Arabia’s non-oil private sector posted strong growth in June on the back of increased demand, higher production levels and employment growth.

According to the latest S&P Global Purchasing Managers’ Index, the Riyad Bank Saudi Arabia PMI stabilized at 55 points from 56.4 in May, the lowest since January 2022.

Despite a slowdown in new orders, which produced the slowest growth in nearly two and a half years, non-oil businesses reported a significant increase in output, helping the Kingdom to lead the region with the strongest expansion figures.

Companies increased production levels to support ongoing sales and projects, reflecting a positive business environment.

Naif Al-Ghaith, chief economist at Riyad Bank, said: “The non-oil economy PMI was 55.0 in June, indicating the slowest pace of expansion since January 2022. The component of new orders decreased compared to the previous month, suggesting a slight moderation in demand growth.”

He added: “However, growth in non-oil sectors was supported by a strong increase in output levels. The number of employees also increased, while the delivery time of suppliers continued to improve.”

The second-quarter growth data indicate a positive outlook for Saudi Arabia’s non-oil-based gross domestic product, with expected growth exceeding 3 percent.

High production levels, stable supply chains and moderate job creation point to a flexible and expanding non-oil economy, contributing to the country’s economic diversification efforts.

Saudi Arabia is actively diversifying its economy under Vision 2030 and attracting global investment in technology and tourism through initiatives such as NEOM.

The Kingdom has also opened up its tourism sector with projects such as the Red Sea and Al-Ula, while cultural events and industrial programs such as the National Industrial Development and Logistics Program encourage economic growth.

Concurrent financial reforms and investments in renewable energy will reduce oil dependence. These efforts are complemented by measures to support SMEs and improve education, which prepare the workforce for new economic sectors and underline Saudi Arabia’s commitment to transformation.

United Arab Emirates

The UAE’s non-oil private sector continued to expand in June, although the pace of expansion slowed. The S&P Global UAE PMI fell to 54.6 from 55.3 in May, the lowest point in 16 months.

The decline was primarily caused by sustained competitive pressure, weaker job creation and a slowdown in output growth.

The sector has been challenged by rising input prices, leading to the fastest average price growth since April 2018.

Despite these problems, the number of new jobs at businesses increased significantly, and the number of new orders is the strongest since March. The export volume also increased significantly, reaching the highest level since October 2023.

David Owen, Chief Economist at S&P Global Market Intelligence, commented: “The UAE PMI highlights a slowing trend in non-oil growth in 2024. However, companies continue to enjoy strong customer demand and strong sales channels, which will maintain production expectations and drive purchasing activity.”

Owen added: “On the downside, input price pressures are at their strongest for almost two years, leading firms to raise output prices for the second consecutive month.”

Consistently strong demand and sales indicate a resilient market despite external pressure and challenges.

In recent months, the UAE has initiated several projects to boost its non-oil sector. For example, the Dubai Industrial Strategy 2030 aims to increase the total output and value added of the manufacturing sector and increase the depth of knowledge and innovation, making Dubai a preferred manufacturing platform for global businesses.

In addition, Abu Dhabi’s Ghadan 21 program continues to invest in economic infrastructure projects and initiatives that support and transform the emirate’s economy, knowledge ecosystem and communities.

Qatar

Qatar’s non-energy private sector produced significant growth in June, which represents the fastest expansion in nearly two years, according to the latest Purchasing Managers’ Index survey compiled by Qatar Financial Center and compiled by S&P Global.

Rising for the fifth time this year, the PMI hit a 23-month high due to increased activity and a surge in new business.

In June, the PMI came in at 55.9 from 53.6 in May, marking the most significant improvement in non-energy private sector conditions since July 2022.

Output grew at the fastest pace in a year and a half, with notable growth in the manufacturing and construction industries.

In the last 13 months, the number of new jobs has grown the fastest, which was confirmed by the higher number of clients and effective promotional activities.

Employment growth continued for the sixteenth consecutive month, reflecting ongoing business expansion and demand for highly skilled workers.

Despite rising demand, inflationary pressures remained moderate, with input prices rising only marginally since May and fees charged for goods and services falling.

Companies were optimistic about the 12-month outlook, attributing positive forecasts to recent branch openings, new customers and marketing campaigns.

Qatar has strengthened its non-oil sector through initiatives such as investment in infrastructure and industrial development, support for tourism and hospitality, and the establishment of duty-free zones aimed at diversifying the economy away from oil and gas revenues.

Kuwait

Kuwait’s non-oil private sector showed solid growth in June, with the S&P Global Kuwait PMI at 51.6, up slightly from May’s 52.4.

The index remained above the neutral 50 mark for the 17th consecutive month, indicating continued improvement in business conditions.

Employment in the sector rose at the fastest rate on record due to sustained new orders and increased production. Despite a sharp rise in input costs, the rate of inflation moderated in the third month, allowing firms to limit price increases to customers.

Kuwaiti businesses have faced input cost inflation, but the rate of growth in input prices has moderated from peaks earlier in the year.

Andrew Harker, Chief Economist at S&P Global Market Intelligence, said: “The continued inflow of new orders encouraged companies to expand their workforce at the sharpest pace on record in June.”

Companies were better able to manage these costs, resulting in moderate price increases for their goods and services.

“There were several signs that input cost inflation was easing, allowing companies to continue their policy of limiting price increases to customers to help secure new work. A key driver of increased spending has been advertising spending, which has often been central to non-oil private sector growth in recent months,” Harker added.

Kuwait is actively working to diversify its economy through initiatives such as the Kuwait National Development Plan, which aims to transform Kuwait into a regional and international financial and trade hub. Recent projects include “Madinat al-Hareer” or Silk City and the expansion of Mubarak Al Kabeer Port.

Global overview

In June, the US PMI for the non-manufacturing sector was 51.6, indicating moderate growth. China’s Caixin Services PMI stood at 51.2, up from 54 in May.

The HCOB Germany Services PMI business activity index, which is derived from a question about changes in business activity in the previous month, reached 53.1 in June.

This is the fourth consecutive month above the unchanged threshold of 50, indicating a stable pace of expansion.

However, this is down slightly from May’s 12-month high of 54.2, the first decline in the index since January.

In contrast, the PMI for Japanese services was 49.4 in June from 53.8 in May.

These comparisons underline the relatively strong performance of the Gulf region, particularly Saudi Arabia’s leading position with a PMI of 55.

Despite facing some headwinds, the non-oil sectors in these Gulf countries continue to show resilience and strong growth, which bodes well for their economic diversification efforts.

Produced globally by S&P Global and some local trade associations, the Purchasing Managers’ Index is a survey-based economic indicator designed to provide timely insight into business conditions.

This includes unique measures such as business performance, new orders, employment costs, and sales prices, as well as exports, purchasing activity, supplier performance, order backlogs, and inventories of inputs and finished goods.

By asking respondents to report changes from the previous month and their views on future output, the PMI anticipates changing economic trends and can serve as an alternative gauge to official data, which may be delayed or suffer from quality issues.

It initially focused on manufacturing, but has now expanded to include services, construction and retail.

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