Business conditions across the United Arab Emirates’ non-oil private sector eased with the headline S&P Global UAE Purchasing Managers’ Index slipping from 54.2 in September to 53.8 in October. Growth remained above the mid-year trend but the moderation highlights emerging caution amid new challenges.
The decline in the PMI reflects a tempering of momentum, notably in hiring and new business orders. While the headline index still signals expansion, firms recorded a marked slowdown in workforce additions and a less vigorous rise in new demand. The employment sub‐index registered a slower pace of job creation, suggesting that businesses are exercising restraint despite ongoing growth.
New orders, though still increasing, advanced at a more moderate rate. While output rose at a decent clip—underpinned by strong pipelines from prior contracts—the drop-off in fresh order intake points to softer underlying demand. Firms cited intensifying competition and lingering supply-chain pressures as contributing factors. These concerns mirror the assessment by economists that the non-oil sector’s buoyancy may now depend more heavily on previously secured work rather than newly generated projects.
Cost pressures held steady and input inflation remained manageable, yet firms’ ability to pass on higher costs to clients continued to be constrained by competitive dynamics. Some companies flagged that margin erosion is more likely if the environment of multiple players chasing similar opportunities persists. At the same time, confidence among firms stayed positive, though many noted that their optimism is premised on the assumption there is no sharp external shock or further regional disruption.
Across the sub-indices, output held firm as companies drew on existing project activity and infrastructure spending to maintain forward momentum. Nevertheless, the discrepancy between output and new orders has widened, signalling a possible transition from demand-driven growth to backlog-driven expansion. Backlogs of work remain elevated, contributing to the sector’s ability to sustain activity despite headwinds.
The slowdown occurs against a backdrop of ongoing economic diversification efforts by the UAE, where non-hydrocarbon sectors are central to medium-term growth ambitions. Authorities have been promoting tourism, logistics, manufacturing and innovation as engines of sustainable expansion. The non-oil private sector’s performance remains key to these strategic shifts. That said, the current data suggest that the pace of diversification may face a headwind if new business growth does not pick up.
Regional geopolitical tensions and global economic uncertainties remain in play and could weigh on business sentiment or investment flow. Some analysts point to softening external demand and heightened competition for contracts as emerging risks to the non-oil sector’s vigour. Firms are therefore showing greater caution, incrementally delaying large-scale hiring decisions or major capital outlays.
The employment slowdown is particularly noteworthy because job creation has been one of the most consistent growth levers for non-oil businesses across the UAE. A pull-back in hiring could signal a shift in firms’ expectations about future activity or their inclination to wait for clearer signals before expanding capacity further.
While the PMI remains comfortably above the 50 threshold denoting growth, the downgrade in the headline number and several key sub-indices suggest that momentum is not as strong as it was earlier in the year. Firms and policymakers alike may need to consider whether broader stimulus, regulatory incentives or infrastructure investments are needed to sustain the upward trajectory and avoid a sharper deceleration.
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