The UAE’s non-oil business sector has experienced fluctuating growth in recent months, with the Purchasing Managers’ Index (PMI) showing mixed trends. While some periods saw steady expansion and increased hiring, others indicated a slowdown in demand momentum, particularly in March and May. Despite these shifts, businesses generally remain optimistic about future growth, supported by strong pipelines and national infrastructure development.
Shifting Growth Trajectories
Growth in the UAE’s non-oil private sector has shown a varied pattern. In March, the S&P Global PMI moderated to 54.0 from 55.0 in February, marking the slowest growth since September. New order growth also slowed for the third consecutive month. Conversely, April saw steady growth, with the PMI remaining at 54.0, and employment rising at the fastest pace in 11 months. However, May brought another slowdown, with the PMI dropping to 53.3, its lowest reading in nearly four years, despite demand remaining strong but easing from recent highs.
Key Takeaways
- March Slowdown: The non-oil private sector experienced a moderation in growth, with new orders slowing for the third consecutive month. Employment growth hit a nearly three-year low, and Dubai’s non-oil PMI also fell to a five-month low.
- April Stability and Hiring Boost: Growth held steady, and employment saw its fastest increase in 11 months, driven by efforts to reduce backlogs and support new business. International demand also saw its strongest upturn in five months.
- May’s Weakest Pace: Growth slowed to its weakest in nearly four years, with the output expansion being the slowest in 44 months. Business optimism also fell to its lowest level since January.
- Persistent Optimism: Despite the fluctuations, UAE firms generally maintain optimism for future growth, citing strong sales pipelines and resilient market conditions.
Factors Influencing Performance
Several factors have influenced the non-oil sector’s performance. In March, some firms faced challenges in meeting sales targets, and while input purchases ramped up, finding suitable candidates for employment proved difficult. April’s steady growth was partly attributed to a strong upturn in international demand, though payment delays posed challenges in completing existing work. By May, competitive pressures and weaker trade due to US tariffs were cited as contributing to the slowdown, alongside a record decline in inventories as firms streamlined holdings.
Outlook and Challenges
While the overall sentiment among UAE firms remains optimistic, supported by strong pipelines and national infrastructure development, challenges persist. The accumulation of backlogs and the struggle to recruit suitable candidates have been recurring themes. The subdued business expectations in May, reaching their lowest since January, suggest a degree of uncertainty about the longevity of current growth trends. However, the underlying strength of demand and ongoing national development projects are expected to provide continued support for the non-oil sector.
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 grows steadily in April as hiring speeds up, PMI shows, Reuters.
- UAE non-oil business activity growth holds steady in November, PMI shows, Reuters.
