KSA, UAE, and Egypt’s non-oil private sector fared in June

How the KSA + UAE + Egypt’s non-oil private sectors fared in June: Purchasing manager indices (PMIs) tracking non-energy sectors saw varying results in the three countries in June. Saudi Arabia experienced an acceleration in non-oil business activity, the UAE saw a slight improvement in the UAE, while Egypt’s PMI reading dipped further in the contraction territory.

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

SAUDI ARABIA-

Non-oil business activity in the Kingdom accelerated in June, driven by expansions in new client demand and a surge in hiring, according to the Riyad Bank Saudi Arabia PMI (pdf). The seasonally adjusted headline figure rose to a three-month high of 57.2 in June, up from 55.8 in May, slightly above its long-run average of 56.9

New orders rose at the fastest pace in four months: The rate of new business growth rose to 64.3 in June from 62.5 in May, a significant improvement compared to a 58.6 low in April, Reuters reported. Firms attributed the improvement to the acquisition of new clients, enhanced marketing, and better demand conditions, with the upturn primarily driven by domestic sales.

Output levels saw softer growth, however: While demand drove another expansion of output at the end of the second quarter, the pace of activity growth eased slightly to a 10-month low, according to Riyad Bank.

Purchasing activity grew at its fastest rate in two years, in response to rising input needs to fulfill new orders. Nearly 40% of survey respondents increased their purchases.

Cost pressures pushed up selling prices: The surge in hiring contributed to the highest increase in wage costs on record. This — along with rising material prices — led to companies raising their selling prices, reversing the declines seen in May and “signalling an improved ability to pass on higher costs to customers,” Riyad Bank Chief Economist Naif Al Ghaith said.

Strong optimism for the year ahead: Confidence about future activity climbed to a two-year peak, supported by healthy order pipelines, robust demand, and stronger domestic economic conditions. “On the future outlook, sentiment among non-oil businesses remains highly positive,” Al Ghaith said.

UAE-

The UAE’s non-oil private sector saw a slight improvement in June despite a slowdown in demand on the back of regional tensions, with the S&P Global PMI (pdf) edging up to 53.5 from 53.3 in May. The uptick was driven by stronger output and a stabilization in inventories, though new order growth slowed to its weakest pace in 45 months, while export growth was softer than domestic demand rise, according to a note (pdf) from Emirates NBD.

Firms cited client hesitation amid ongoing instability following the conflict between Iran and Israel, though some were able to cushion the impact through promotions and by expanding customer bases. “The UAE non-oil sector showed signs of a minor setback in June due to the conflict between Israel and Iran,” S&P Global’s David Owen said, adding that the impact, however, was “negligible” considering the expansion in output.

On the bright side, backlogs increased at the slowest pace in 17 months, as companies worked to clear long-standing capacity pressures. Purchasing activity also recovered modestly, while softer inflation in input prices — easing to an almost two year low — allowed firms to lower selling prices marginally for the first time in six months, in a bid to remain competitive.

Business confidence has not been impacted by the escalation in regional tensions, though, with confidence at its highest in seven months, attributed to projected sales growth and hopes of regional stability. “[A] rebound in sales growth is wholly possible in the coming months should regional tensions ease,” Owen said.

Gulf non-oil sectors end 2Q 2025 strong, but headwinds loom: The Gulf’s non-oil sectors wrapped the 2Q 2025 with strong performance, despite the coinciding regional escalation between Iran and Israel. However, signs pointing to a softening of activity ahead. “Tensions have since eased, but there may be a lingering drag on activity due to security fears which, coupled with oil prices back below $70pb reducing the scope for fiscal support, means that non-oil GDP growth is likely to soften in the coming quarters,” Capital Economics’ James Swanston wrote in a research note seen by EnterpriseAM.

The UAE, Qatar, and Kuwait are set to maintain fiscal policy supportive, thanks to their strong balance sheets, Swanston noted. In contrast, Saudi Arabia, Oman, and Bahrain face an upcoming period of fiscal consolidation, which is expected to cause non-oil growth to slow, Swanston added.

MEANWHILE IN EGYPT-

Non-oil private sector activity continued to decline in June, with rates of decline in new orders and output accelerating, resulting in the sharpest reduction in purchasing in 11 months, according to S&P Global’s latest Purchasing Managers Index (PMI) report (pdf) for Egypt. The country’s headline figure dropped from 49.5 in May to 48.8 in June, marking the fourth consecutive month below the 50.0 neutral threshold.

New orders and overall output continued to decline during the month, with some acceleration. Although the pace of decline quickened, it was modest overall, according to the report. On the bright side, input cost pressures eased in June, leading to a slower rise in output prices.

Firms continued to reduce their input purchases for the fourth consecutive month, with manufacturers seeing the largest cutbacks out of the main sectors monitored by the survey. “The sharper decline in buying levels meant that total inventories stalled in June after increasing marginally in each of the prior three months. There was nevertheless a degree of pressure on suppliers, as highlighted by a slight lengthening of delivery times for the second month running,” the report read.

Geopolitical fears cloud business outlook: “Overall expectations for future activity were the lowest ever recorded in June, with the respective index having hovered close to all-time lows in 2025 so far, Owen said, adding that this “downbeat sentiment reflects subdued hopes for order books, as well as concerns that geopolitical risks could cause greater economic disruption.”

Others share this view: “Egypt’s PMI reading was expected to remain below the 50.0 threshold in June,” Thndr Securities Brokerage’s Amr El Alfy told EnterpriseAM. “Unfavorable geopolitical conditions in June likely caused the headline PMI to drop below the previous month’s level. This may have affected the firms’ sentiment regarding increasing production in anticipation of inflation slowing down,” El Alfy told us.