UAE non-oil growth accelerates to 20-month high

The UAE’s non-oil private sector expanded at its fastest pace since December 2024 in August, as stronger demand and output lifted business conditions despite continued caution over hiring.

The seasonally adjusted S&P Global UAE Purchasing Managers’ Index rose to 55.3 from 52.7 in July, moving further above the 50 threshold that separates expansion from contraction. The reading marked a second successive monthly acceleration and pointed to a marked improvement in operating conditions across the non-oil economy.

New business increased at the joint-fastest pace in more than two years, while output growth strengthened to a six-month high. Survey respondents linked the increase in sales to firmer customer demand, improved export activity and a gradual easing of caution associated with the Middle East conflict.

Export orders rose for a second consecutive month after falling through the second quarter, adding to signs that demand conditions had broadened beyond the domestic market. Companies also reported stronger client spending and a healthier flow of new work as supply disruptions became less severe.

David Owen, principal economist at S&P Global Market Intelligence, said the August data showed that the non-oil economy had moved into a stronger phase, with demand accelerating, delivery times improving and cost pressures easing. He said the combination pointed to a broad strengthening in domestic business conditions.

The rebound in demand also created pressure on capacity. Backlogs of unfinished work increased rapidly as some firms struggled to expand operations quickly enough to match new orders. Despite that pressure, employment fell for the second time in three months, indicating that businesses remained cautious about committing to larger workforces while geopolitical uncertainty persisted.

Purchasing activity strengthened sharply as companies sought to rebuild inventories and prepare for higher sales. Stocks of inputs increased at the fastest pace in nearly three years, reversing the subdued inventory accumulation seen earlier in the year.

Companies increasingly used local suppliers to reduce exposure to disrupted regional trade routes, according to the survey. The shift helped shorten delivery times and ease sourcing problems, while stronger flows from nearby vendors contributed to slower growth in input costs.

Overall input price inflation eased to its weakest level since February, although firms continued to report higher costs for energy, fuel, cement, steel and chemicals. The moderation in cost pressures came as supply conditions improved and companies adapted procurement strategies to a more uncertain trading environment.

Selling prices nevertheless rose modestly, recording their quickest increase in four months. Some businesses passed higher costs to customers as demand strengthened, while others continued to use discounts and promotions because of competitive pressure.

Business confidence also improved, reaching its highest level since April. Firms cited stronger sales pipelines, expectations of construction-related activity and hopes for an easing of regional tensions, though confidence remained tempered by uncertainty over the conflict and its wider economic effects.

Dubai’s non-oil private sector also strengthened in August. Its PMI climbed to 54.1 from 51.7 in July, with output and new orders both rising at six-month highs as customer spending and export trade improved.

Businesses in Dubai also increased input inventories at the fastest pace since December 2017, reflecting efforts to support stronger activity and guard against possible supply interruptions. Employment edged lower, however, adding to pressure on capacity as demand increased.

Cost trends in Dubai differed from those across the wider UAE. Companies in the emirate reported the fastest rise in total input costs in four months, even as the nationwide survey showed an easing of overall cost inflation.

The August national reading represented a sharp improvement from June, when the UAE PMI had fallen to 50.8, its weakest level in more than five years, before recovering to 52.7 in July. The subsequent rise to 55.3 showed that activity regained momentum as businesses adjusted to supply-chain disruption and regional uncertainty.