Kuwait's non-oil private sector PMI fell to 46.4 in June 2026 from 47.2 in May, remaining below the 50-point expansion threshold for the fourth consecutive month, according to S&P Global data. Meanwhile, Qatar's PMI rose to a four-month high of 47.6 from 45.9, indicating a slower pace of contraction in business conditions.
Kuwait's PMI Decline Driven by Regional Conflict and Cost Pressures
The slowdown in Kuwait's non-energy sector occurred against a backdrop of heightened regional tensions following the escalation of the conflict that began in late February 2026, which increased economic uncertainty across the Gulf. Andrew Harker, economics director at S&P Global Market Intelligence, said: “Although there have been some more positive signs in recent weeks regarding a potential resolution to the conflict in the region, firms in Kuwait continued to feel the effects in June.” He added: “Price increases and competition for scarce new orders — particularly from abroad — are limiting growth opportunities at present and leaving companies in retrenchment mode.”
New orders declined further, driven by lower customer numbers, intense competition, clients’ reluctance to accept higher prices, and challenging market conditions linked to the regional conflict. New export orders registered the steepest decline, excluding the April 2020 COVID-19 lockdown, since the survey began in September 2018. The conflict and border issues with Iraq had a particular impact on exports.
Business activity declined for the fourth straight month, with the pace of contraction accelerating from May amid reduced workloads. Employment declined for the fourth consecutive month at a pace similar to that recorded in May. Despite staff reductions, companies maintained sufficient capacity to clear backlogs of work. Purchasing activity fell sharply, recording the fastest rate of decline since April 2020, due to lower workloads and higher input prices. Inventories decreased at the fastest pace on record.
Outlook for Kuwait: Hope for Stabilization After US-Iran MoU
Looking ahead, companies remained concerned about future market conditions because of the regional conflict. Some companies, however, expected conditions to improve through new product development, high-quality customer service, and marketing initiatives. “As we enter the second half of the year, firms will be hoping that the signing of the memorandum of understanding for a cessation of hostilities between the US and Iran will help lead to a more stable market environment and an improvement in business conditions,” concluded Harker.
Qatar PMI Shows Signs of Stabilization
In a separate report, S&P Global said business conditions in Qatar’s non-energy private sector continued to deteriorate in June, but at a markedly slower pace. The S&P Global Qatar PMI rose to a four-month high of 47.6 from 45.9 in May. The report said output stabilized after six consecutive months of decline — the longest such streak since 2019-20 — as companies reported a return to normal operations following earlier disruptions linked to the US-Iran conflict, alongside recovering demand and improved business capacity. Notably, there was a rebound in construction activity during the month.
Trevor Balchin, economics director at S&P Global Market Intelligence, said: “The PMI rose to a four-month high in June and the outlook for the next 12 months improved notably, hinting that the non-energy private sector was on the cusp of a recovery approaching the midway point of 2026.” He added: “The June data collection period began on 11 June, prior to the signing of an initial peace agreement between the US and Iran on 17 June, and closed on 23 June.”
Qatari non-energy firms reported another decline in new business in June, extending the current sequence of contraction to seven months. Lower new orders reflected ongoing business uncertainty due to the US-Iran conflict. Companies also cited increased competition and challenges, including a slowdown in the real estate and tourism sectors.
“Employment continued to increase, albeit at a modest rate, while purchasing of new inputs rose for the first time in six months as companies replenished inventories,” added Balchin. Companies’ expectations for the year ahead improved sharply in June, reaching a four-month high in the Future Output Index. Respondents linked the brighter outlook to anticipated improvements in market conditions, greater investor confidence, and opportunities arising from the initial agreement to end the US-Iran conflict.
Inflationary Pressures Mount in Qatar
Although there were signs of a recovery in market conditions heading into the second half of 2026, the June data highlighted mounting inflationary pressures. “Overall input cost inflation accelerated for a record sixth month running to a 20-month high, while charges were increased at the strongest rate since December 2022. Purchase price inflation eased since May, however, suggesting that a peak may have been reached for raw material cost pressures,” added Balchin.
