Kuwait’s non-oil private sector came under renewed pressure in June, as regional tensions and rising prices weighed on demand. The result was a sharper contraction in both business activity and new orders. The latest Purchasing Managers' Index (PMI) reading, released Sunday by S&P Global, showed a clear decline in operational and employment levels as the first half of the current year concluded. Kuwait’s headline PMI declined to 46.4 in June, down from 47.2 in May. The index remained below the neutral 50-point threshold for the fourth consecutive month, signaling a continued and marked deterioration in business conditions across the non-oil private sector. Participating companies attributed the decline in new orders mainly to a smaller customer base and greater caution among buyers in response to rising prices. The weakness was not confined to the domestic market. External demand also came under significant pressure, with regional conflict and border-related issues with Iraq contributing to a sharp fall in new export orders. Excluding the complete lockdown period during the COVID-19 pandemic in April 2020, new business from abroad registered its sharpest decline in June since the study began in September 2018. Analyzing Kuwait's economic landscape, Andrew Harker, Economics Director at S&P Global Market Intelligence, said that companies in Kuwait continued to feel the impact of regional tensions throughout June, despite some recent positive signs that the conflict could move toward resolution. Higher prices and intense competition for scarce new orders, especially from abroad, are currently curbing growth opportunities and leaving businesses in a position of retrenchment, he added. Looking ahead to the second half of the year, he said businesses hope that the signing of the memorandum of understanding to cease hostilities between the US and Iran will help create a more stable market environment and improve overall business conditions. Within Kuwait, weaker output prompted companies to reduce staffing levels for the fourth consecutive month, at a pace broadly in line with the decline recorded in May. Lower workloads also led firms to scale back input purchasing sharply. The contraction was the fastest since April 2020, while inventories fell at the quickest rate since the series began. At the same time, companies continued to face rising operating costs, including higher expenses for electricity, marketing, and transportation. To protect profitability and offset these pressures, firms again raised the selling prices of their products and services. As a result, output price inflation accelerated to its fastest pace since September 2021, reaching its highest level in nearly five years.
