https://arab.news/ggtw4
RIYADH: Qatar’s non-energy private sector continued to feel the impacts of the regional conflict in May, as new business inflows fell sharply, according to S&P Global.
The country’s Purchasing Managers’ Index dropped to 45.9 in May from 46.4 in April, pointing to a deterioration in business conditions, the ratings firm said.
The slowdown in Qatar’s non-energy sector growth is occurring against the backdrop of rising escalation triggered by the outbreak of war between the US and Israel against Iran in late February, which has increased economic uncertainty in the Gulf.
Saudi Arabia showed resilience in non-oil business activities across May, recording a PMI reading of 52.8, well above the 50-point threshold that separates expansion from contraction.
The UAE PMI for May stood at 52.6, followed by Kuwait at 47.2 and Egypt at 47.1.
“The latest PMI results for Qatar showed that the non-energy private sector economy had yet to return to normality midway through the second quarter. Intakes of new business continued to fall sharply, at a rate little changed from April,” said Trevor Balchin, economics director at S&P Global Market Intelligence.
He added: “This sustained downturn in new work had a cooling effect on the labor market, as both employment and wages rose at the slowest rates in their respective 22-month sequences of increases.”
According to the report, new business continued to fall sharply in May, driven by weaker demand linked to ongoing regional tensions, market instability, and uncertainty.
Sectors such as tourism and construction were particularly affected, though the rate of decline eased compared to March, when the PMI stood at 38.7.
Labor market and costs
According to S&P Global, employment rose for the 22nd consecutive month in May, but at the weakest rate over this sequence.
This cooling of the labor market was corroborated by the slowest wage inflation over the same period.
Despite this, overall cost pressures intensified, with input price inflation accelerating for a fifth successive month to the highest level since October 2024, while purchase prices increased at the fastest pace since February 2018.
As cost pressure increased, Qatari firms moved to protect their margins in May, with average prices charged for goods and services rising at the strongest rate since December 2022, during the FIFA World Cup.
Cautious optimism
On a positive note, output levels showed signs of stabilization as disruptions eased for some firms, and the 12-month business outlook recovered further.
Firms expressed cautious optimism, citing potential improvements in market conditions if geopolitical tensions ease or resolve.
“Survey indicators gave grounds for cautious optimism. Total output fell only marginally as some firms reported resuming operations, and the business outlook stabilized as optimists slightly outnumbered pessimists regarding the next 12 months,” said Balchin.