The UAE’s non-oil private sector experienced a notable slowdown in growth during May, reaching its weakest pace in nearly four years. This follows a period of mixed performance, with robust expansion earlier in the year, steady growth in April, and a moderation in March. The deceleration in May is attributed to competitive pressures and the impact of US tariffs, despite continued strong demand.
UAE Non-Oil Sector: A Rollercoaster of Growth in 2025
The UAE’s non-oil business sector has seen fluctuating growth patterns throughout 2025. January began with robust expansion, followed by a moderation in March, steady growth in April, and a significant slowdown in May.
- January: The non-oil private sector expanded robustly, with the S&P Global UAE Purchasing Managers’ Index (PMI) at 55.0. New orders and business activity rose sharply, driven by favorable market conditions and easing cost pressures. However, capacity pressures and competitive challenges were noted.
- March: Growth moderated, 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 its weakest level in nearly three years.
- April: Growth held steady, with the PMI remaining at 54.0. Employment rose at the fastest pace in 11 months, as firms aimed to reduce workloads and support new business. New order growth quickened slightly, partly due to a strong upturn in international demand.
- May: Growth slowed to its weakest pace in nearly four years, with the PMI falling to 53.3 from 54.0 in April. This was the lowest reading since September 2021. The rate of expansion in output was the slowest in 44 months, and business expectations for future output were subdued.
Key Factors Influencing the Slowdown
The deceleration in May’s non-oil business growth can be attributed to several factors:
- Competitive Pressures: Businesses reported increased competitive pressures.
- US Tariffs: Weaker trade due to US tariffs weighed on growth, with some firms noting negative effects on output.
- Softening Momentum: While demand remained strong, it eased from recent highs, leading to a softer pace of new order growth.
- Inventory Reduction: A record decline in inventories was observed as firms streamlined holdings amid slowing growth.
- Subdued Optimism: Business expectations for future output fell to their lowest level since January.
Dubai’s Performance
Dubai’s non-oil private sector also experienced mixed performance:
- March: The headline PMI fell to a five-month low of 53.2 from 54.3 in February. New orders rose sharply but at a slower rate, leading to a rare reduction in employment.
- April: The PMI slowed again, falling to 52.9 from 53.2 in March. New business growth was at its slowest pace since October, and confidence about future activity weakened.
- May: Dubai’s non-oil private sector growth remained steady, with the headline PMI at 52.9, the same as April. Demand momentum strengthened, with the pace of new order growth quickening to a four-month high, driven by improved client confidence and marketing strategies.
Despite the recent slowdown, the UAE remains optimistic about future growth, supported by strong pipelines and national infrastructure development, as the country continues its efforts to diversify its economy away from oil.
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.
