The UAE’s non-oil private sector has experienced fluctuating growth in recent months, marked by periods of robust expansion alongside slowdowns in demand and new orders. While overall sentiment remains optimistic, challenges such as competitive pressures, capacity constraints, and recruitment difficulties have influenced the pace of growth.
UAE Non-Oil Sector Navigates Mixed Economic Currents
The UAE’s non-oil private sector has shown a varied performance, with the S&P Global Purchasing Managers’ Index (PMI) reflecting these shifts. January 2025 saw robust expansion, with the PMI at 55.0, slightly down from December’s 55.4 but indicating strong growth. This period was characterized by sharp increases in business activity and new orders, driven by favorable market conditions and easing cost pressures. However, competitive challenges and cash flow concerns led to subdued business confidence, reaching its lowest since December 2022.
Slowdowns and Contributing Factors
March 2025 witnessed a moderation in growth, with the PMI slipping to 54.0 from 55.0 in February, marking the slowest pace since September. New order growth slowed for the third consecutive month, and employment growth hit a nearly three-year low due to difficulties in finding suitable candidates. Despite this, firms increased input purchases to clear backlogs. Dubai’s non-oil private sector also experienced a slowdown.
May 2025 saw the slowest growth in nearly four years, with the PMI falling to 53.3 from April’s 54.0. While demand remained strong, it eased from recent highs. The rate of expansion in output was the slowest in 44 months, and new order growth, though robust, was the softest in seven months. Competitive pressures and weaker trade due to US tariffs were cited as contributing factors. Business expectations for future output were subdued, reaching their lowest level since January.
Periods of Steady Growth and Optimism
April 2025 showed steady growth, with the PMI holding at 54.0. New order growth quickened slightly, partly due to the strongest upturn in international demand in five months. Employment rose at the fastest pace in 11 months as firms aimed to reduce workloads and support new business. Despite a slowdown in business activity growth due to payment delays, firms remained optimistic about future activity, with confidence at its highest level in 2025 so far.
October 2024 saw an uptick in non-oil private sector activity, with the PMI rising to 54.1 from 53.8 in September. Output expanded more sharply, reaching its highest since April, driven by higher sales and healthy pipelines. However, demand grew at the slowest rate in 20 months, with new orders softening to their lowest level since February 2023. Market crowding and its impact on sales and job creation were noted, though a strong pipeline of work backlogs offered future support.
Key Takeaways
- Fluctuating Growth: The UAE non-oil sector has experienced periods of both robust expansion and notable slowdowns.
- Demand Dynamics: While demand generally remains strong, its momentum has varied, impacting new order growth.
- Employment Challenges: Recruitment difficulties have been a recurring theme, affecting employment growth in certain periods.
- Competitive Pressures: Increased competition and external factors like tariffs have influenced growth rates.
- Persistent Optimism: Despite challenges, businesses largely remain optimistic about future growth, supported by strong pipelines and national infrastructure development.
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 activity growth picks up in October, PMI shows, Reuters.
- UAE non-oil business grows steadily in April as hiring speeds up, PMI shows, Reuters.
