UAE’s non-oil private sector growth experienced a notable slowdown in May 2025, reaching its weakest pace in nearly four years. Despite this moderation, the sector remains in expansion territory, with the Purchasing Managers’ Index (PMI) staying above the critical 50.0 threshold. This trend follows a period of robust, albeit fluctuating, growth earlier in the year.
UAE Non-Oil Sector Growth Cools in May
The S&P Global UAE Purchasing Managers’ Index (PMI) for the non-oil private sector dropped to 53.3 in May 2025, down from 54.0 in April. This marks the lowest reading since September 2021, indicating a significant deceleration in growth momentum. The expansion rate for output was the slowest in 44 months, even as demand conditions remained supportive.
Key Takeaways
- PMI Decline: The headline PMI fell to 53.3 in May, the lowest since September 2021.
- Output Slowdown: Expansion in output was the slowest in 44 months.
- New Orders: While robust, the pace of new order growth softened to a seven-month low.
- Competitive Pressures: Reports indicate that competitive pressures and U.S. tariffs contributed to the slowdown.
- Inventory Reduction: Firms recorded a significant decline in inventories, streamlining holdings amidst slower growth.
- Subdued Optimism: Business expectations for future output reached their lowest level since January.
A Look Back at 2025 Performance
The slowdown in May follows a period of varied performance for the UAE’s non-oil sector throughout 2025:
- January: The sector started the year robustly, with the PMI at 55.0, driven by strong activity and new orders, despite capacity pressures.
- February: Growth held steady at 55.0, supported by strong demand, though new order growth softened slightly.
- March: A moderation was observed, with the PMI slipping to 54.0, marking the slowest growth since September of the previous year. New order growth slowed for the third consecutive month.
- April: Growth stabilized at 54.0, with employment rising at the fastest pace in 11 months to address workloads and support new business.
Challenges and Outlook
S&P Global Market Intelligence Senior Economist David Owen noted that while demand remained strong, competitive pressures and the impact of U.S. tariffs weighed on growth. The survey also highlighted a record decline in inventories and a softening in the accumulation of backlogs, suggesting a more subdued demand environment. Business optimism for future output has also decreased, reaching its lowest point since January. Despite the overall slowdown, Dubai’s non-oil private sector maintained steady growth in May, with its PMI at 52.9, and saw a strengthening in new order momentum.
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 sector maintains steady growth in February, PMI shows, Reuters.
- UAE non-oil business grows steadily in April as hiring speeds up, PMI shows, Reuters.
