How KSA + Kuwait + Egypt’s non-oil private sectors fared in January: Purchasing manager indices (PMI) tracking non-energy sectors in the three countries started the year on positive notes, holding above the 50.0 mark threshold. The kingdom recorded its best performance since September 2014, while Kuwait saw an expansion, albeit at a slower pace. Meanwhile, a solid increase in output and sales volumes pushed Egypt’s non-oil business to expand at its highest rate in over four years.

REMEMBER- The all-important 50.0 mark is the threshold separating contraction from growth. Anything above 50 denotes expansion, while anything below indicates contraction.

First up, Saudi Arabia: Non-oil business activity in the Kingdom recorded its best performance since September 2014, with the country seeing the fastest increase in total new orders since June 2011, according to Riyad Bank Saudi Arabia PMI (pdf). The headline figure came in at 60.5, up from 58.4 in December, moving it well beyond the 50.0 mark that separates growth from contraction.

New orders surged during the month: The new orders subindex accelerated to a reading of 71.1, up from 65.5 in December, driven by “accommodative economic conditions” and new infrastructure projects, which helped boost customer orders and total export sales. “Nearly 45% of firms observed higher sales volumes, attributing this growth to positive economic conditions and the acceleration of infrastructure projects. The rise in export orders further complemented domestic demand, particularly from GCC countries, reflecting effective marketing and competitive pricing strategies,” Riyad Bank Chief Economist Naif Al Ghaith said.

Purchasing was also up: Firms’ purchasing activity remained positive in January, with 35% of respondents seeing an uplift in the quantity of new inputs bought.

A rise in input costs represented the main downside for the Kingdom: Input price inflation grew at its second-fastest in almost four-and-a-half years in non-oil firms, which many attributed to higher material prices driven by heightened demand and continuing geopolitical tensions. This, in turn, led firms to increase their output prices at the fastest pace in a year.

The rate of employment was also positive throughout the month, with hiring levels “rising solidly.”

Over in Kuwait: Non-oil activity expanded in January, albeit at a slower pace as input costs continued to rise significantly, despite easing inflation at the beginning of the year, according to S&P Global’s PMI (pdf). The country’s headline reading dipped to 53.4 in January, down from 54.1 in December, still holding well above the 50.0 mark for healthy growth.

New orders “remained marked” at the start of 2025, continuing their m-o-m growth over the last two years. New export orders also posted an expansion on the back of “new business from clients in neighbouring countries,” according to the report. In response to increasing workloads, Kuwaiti non-oil companies expanded their purchasing activities. Yet, the latest increase failed to surpass November's record high.

Output sustained its upward pace boosted by advertising, competitive pricing, ongoing business from existing clients, while some firms benefited from an influx of visitors attending the Arabian Gulf Cup early last month.

Input costs continued to rise significantly, regardless easing inflation at the beginning of the year. Meanwhile, selling prices rebounded in the wake of a “fractional reduction” in December.

While hiring rose at the fastest rate on record for the fourth running month in January — equal with June and November 2024 — in a bid to address increasing workloads, it failed to avoid a rise in backlogs given the sharp increase in new orders.

In Egypt, non-oil business activity expanded at its highest rate in over four years, buoyed by a solid increase in output and sales volumes, according to S&P Global Egypt PMI (pdf). Egypt’s headline figure rose to 50.7 in January, up from 48.1 in December — representing the index’s highest level for Egypt since November 2020. This marks only the second time the country's non-oil activity has hit expansion territory during this period.

“The ceasefire [agreement] between Israel and Hamas likely added confidence to markets in January,” S&P Global senior economist David Owen said.

New orders and output levels saw modest growth in January: The output sub-index rose to 51.1 from 47.1 in December, while the new orders rose to 51.3 from 46.4. The rise was driven by “an improvement in economic conditions and falling inflationary pressures,” which gave clients more confidence to place new orders, particularly in the manufacturing, construction and wholesale & retail sectors. Meanwhile, increased customer demand led many firms to expand their output during the month.

Input prices rose at their softest pace in eight months, which “helped to soften cost pressures and fuel a pick-up in sales for only the second time in over three years,” Owen said. While some respondents cited increased cost pressures driven by a stronger USD, other non-oil firms — particularly in the construction sector — saw reduced material prices during the month. This also helped drive the purchase of inputs, which contributed to a slight increase in firms’ input inventories.

Hiring also bounced back slightly in January: Total employment in Egypt stabilized during the month, following two months of job cuts across the non-oil economy. However, overall hiring remained subdued, as increased hiring across some businesses was counteracted by reductions in others.

Despite positive results, overall business sentiment in Egypt is still uneasy: Business expectations in Egypt slipped to a historically low level in January, “showing that firms are still uncertain about economic stability over the longer term,” Owen said.

Businesses in Kuwait and KSA remain confident about 2025: Saudi firms remain highly optimistic for the year, with businesses expecting to see sustained growth in demand and supportive market conditions throughout 2025. In Kuwait, businesses remain positive over growth prospects, but overall expectations decrease to a four-month low.

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