The UAE’s non-oil business sector has experienced a period of fluctuating growth, marked by both robust expansions and notable slowdowns according to recent Purchasing Managers’ Index (PMI) reports. This dynamic landscape reflects shifting demand, competitive pressures, and varying levels of business optimism throughout late 2024 and early 2025.
UAE Non-Oil Sector Navigates Growth Fluctuations
The UAE’s non-oil private sector has shown a mixed performance, with the S&P Global UAE Purchasing Managers’ Index (PMI) indicating periods of strong expansion alongside significant moderation. While the PMI consistently remained above the 50.0 growth threshold, its movements highlight an economy adapting to evolving market conditions.
Key PMI Readings and Trends
- January 2025: The sector expanded robustly with a PMI of 55.0, slightly down from December’s 55.4, but still indicating strong growth. New orders and business activity rose sharply, supported by favorable market conditions and easing cost pressures. However, capacity pressures and competitive challenges were noted.
- March 2025: Growth moderated significantly, 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 as firms struggled to find suitable candidates.
- April 2025: Growth held steady at 54.0, unchanged from March. New order growth quickened slightly, driven by the strongest upturn in international demand in five months. Employment rose at its fastest pace in 11 months, primarily to reduce backlogs.
- May 2025: Growth slowed to its weakest pace in nearly four years, with the PMI falling to 53.3 from 54.0 in April. Output expansion was the slowest in 44 months, and new order growth, while robust, was the softest in seven months. Competitive pressures and US tariffs were cited as contributing factors.
- October 2024: Activity growth picked up, with the PMI rising to 54.1 from 53.8 in September. Output expanded more sharply, but demand grew at the slowest rate in 20 months. New order growth softened to its lowest level since February 2023.
- November 2024: Growth held steady, with the PMI at 54.0, unchanged from October. New orders continued to rise, and employment saw a modest increase. Business confidence improved, driven by strong sales pipelines.
Underlying Factors and Outlook
Several factors have influenced the sector’s performance:
- Demand Dynamics: While demand generally remained strong, there were instances of softening momentum and competitive pressures impacting new order growth.
- Cost and Capacity: Input cost inflation varied, with some periods seeing lower costs, while capacity pressures and rising backlogs of work were persistent concerns.
- Employment Trends: Employment growth fluctuated, with firms sometimes struggling to find suitable candidates despite efforts to reduce backlogs.
- Business Optimism: Optimism about future growth remained, supported by strong pipelines and national infrastructure development, though confidence levels saw some dips, particularly in January and May 2025.
Despite the fluctuations, the UAE’s non-oil sector continues to demonstrate resilience, with businesses adapting to challenges and maintaining a generally positive outlook for future activity.
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.
