According to the latest data, the Purchasing Managers' Index (PMI) for Saudi Arabia and the United Arab Emirates in June, although in the expansion zone, slowed down in growth, with the PMI index hitting a new low. However, the PMI index for Kuwait and Qatar has increased and is at a historically high level.

The Purchasing Managers' Index (PMI) is an economic indicator that timely reflects the commercial situation, covering multiple aspects such as business output, new orders, employment costs, and sales prices, providing important reference for the market, and is of great significance for predicting economic trends and formulating policies. Generally speaking, a PMI of 50 or above represents an expansionary trend in the economy.

Gulf countries are taking a series of actions to promote economic diversification and reduce their reliance on oil. For example, Saudi Arabia is attracting global investment in technology and tourism through mega-projects such as NEOM under its 2030 vision, as well as strengthening financial reforms and investing in renewable energy. Dubai's 2030 Industrial Strategy and Abu Dhabi's Ghadan 21 plan are also continuing to promote the development of manufacturing and the construction of economic infrastructure.

Saudi Arabia: PMI Hits New Two-Year Low

Private sector business activity in non-oil Saudi Arabia continued to grow in June, but the Riyad Bank PMI index grew at a slower pace. The PMI index for June fell from 56.4 in May to 55.0, although still above the 50.0 threshold, it is the lowest level since January 2022.

The growth rate of new orders has declined for a third consecutive month, falling to the lowest level in nearly two and a half years. Some enterprises revealed that the market conditions are gradually becoming less favorable.

Although raw material and operating costs have risen at the fastest rate in four months, enterprises have to maintain or offer discounts to attract and retain customers in a competitive market, which has limited the growth of sales prices.

Enterprises hope to control inventory levels, leading to the slowest growth rate in purchasing activity since September 2021. In addition, under the pressure of wages, employment growth has slowed down, and the growth rate of employment in June was slower than that in May.

Although showing some resilience, the non-oil private sector in Saudi Arabia faces continuous demand weakness and rising costs, which may pose pressure on future business expansion.

UAE: PMI Growth Slows Down

According to the latest data released by S&P Global, the PMI index for the UAE fell from 55.3 in May to 54.6 in June. Despite the pressure of slowing growth, the growth rate of new jobs in enterprises reached its strongest level since March.

David Owen, Senior Economist at S&P Global Market Intelligence, said: 'The UAE PMIs highlight a slowing trend in non-oil industry growth since 2024, with the overall index falling about 3 percentage points since December last year. However, enterprises still enjoy strong customer demand and sales channels, which have maintained output expectations and promoted purchasing activity.'

In terms of the supply chain, with the recovery from the floods in April, backlog jobs in the UAE have shown signs of easing. The delivery time of suppliers has improved at the strongest rate in eight months, which will bring further good news to enterprises.

However, the local inflation rate has reached its highest level in nearly two years, making it difficult for companies to absorb cost increases and raising sales expenses for a second consecutive month. Although the price increase is not high, the inflation rate is the fastest in over six years, as some companies choose to raise prices due to strong customer demand.

Dubai, as the economic center of the UAE, also shows signs of slowing growth in its non-oil private sector. The Dubai PMI index fell from 54.7 in May to 54.3 in June. Although the growth of new orders is still strong, the activity level reported by non-oil enterprises has grown at the most moderate pace in nearly three years.

Qatar and Kuwait: PMI Continues to Grow

Qatar's non-energy private sector achieved its fastest growth in almost two years, with a PMI index of 55.9, driven mainly by increased activity and a surge in new business.

The non-oil private sector in Kuwait maintained steady growth in June, with a PMI index of 51.6, which has been above the neutral point of 50 for 17 consecutive months. Driven by continuous new orders and output growth, employment increased at the fastest pace on record, while inflation eased to some extent despite a sharp rise in input costs.

Qatar is promoting the development of the tourism and hotel industries by investing in infrastructure and industrial development to achieve economic diversification, while Kuwait is striving to transform itself into a regional and international financial and trade center through national development plans and other initiatives.