UAE’s non-oil private sector has experienced fluctuating growth in recent months, marked by periods of robust expansion followed by slowdowns. While demand generally remained strong, factors like competitive pressures, global tariffs, and challenges in recruitment have influenced the overall trajectory, leading to mixed trends in business activity and optimism.
Navigating Economic Currents: UAE’s Non-Oil Sector Faces Headwinds and Tailwinds
The UAE’s non-oil private sector has demonstrated a dynamic performance over recent months, characterized by both robust expansion and periods of moderation. January 2025 saw strong growth, with the S&P Global UAE Purchasing Managers’ Index (PMI) at 55.0, slightly down from December’s 55.4 but indicating healthy expansion. This was driven by favorable market conditions and easing cost pressures, though capacity pressures and competitive challenges were noted.
However, March brought a slowdown, with the PMI slipping to 54.0, the slowest growth since September. New order growth decelerated for the third consecutive month, and employment growth hit a nearly three-year low, despite businesses increasing input purchases to clear backlogs. Dubai’s non-oil sector also experienced a slowdown.
April saw a stabilization, with the PMI holding steady at 54.0. Employment rose at the fastest pace in 11 months, as firms aimed to reduce workloads and support new business. International demand showed its strongest upturn in five months, and business optimism reached its highest level for the year.
May presented a further slowdown, with the PMI falling to 53.3, its lowest since September 2021. This moderation was attributed to competitive pressures and weaker trade amid US tariffs, despite continued strong demand. Output expansion was the slowest in 44 months, and business expectations for future output were subdued, reaching their lowest since January.
Key Takeaways
- Fluctuating Growth: The non-oil sector experienced periods of robust expansion (January, April) interspersed with slowdowns (March, May).
- Demand and Orders: New order growth showed mixed trends, robust at times but softening in March and May.
- Employment Challenges: While hiring picked up in April, overall employment growth has been modest, with firms struggling to find suitable candidates.
- External Pressures: Global tariffs and competitive pressures were cited as factors contributing to slower growth, particularly in May.
- Business Optimism: Optimism varied, reaching a high in April but falling to a low in May, reflecting uncertainty.
Sectoral Performance Highlights
- January 2025: PMI at 55.0, robust expansion driven by new orders and easing costs. Capacity pressures and competition noted.
- March 2025: PMI at 54.0, slowdown in growth and new orders. Employment growth weakest in nearly three years.
- April 2025: PMI steady at 54.0, employment growth fastest in 11 months. Strong international demand and increased business optimism.
- May 2025: PMI at 53.3, weakest growth in nearly four years. Impacted by competitive pressures and US tariffs. Subdued future output expectations.
Despite the recent fluctuations, the UAE’s non-oil economy continues to demonstrate resilience, with underlying demand remaining strong. The focus on economic diversification, particularly in sectors like technology, manufacturing, tourism, and trade, is expected to support future growth, with the Central Bank projecting non-oil growth of 5.1% for the current year.
Sources
- UAE non-oil business sector growth slows in March, PMI shows, Reuters.
- UAE non-oil business growth slows in May, PMI shows, Reuters.
- UAE non-oil business sector expands robustly in January, PMI shows, Reuters.
- UAE non-oil business grows steadily in April as hiring speeds up, PMI shows, Reuters.
- UAE non-oil business activity down in May amid tariff pressures, The National.
