The UAE’s non-oil private sector experienced a significant slowdown in growth during May, reaching its weakest pace in nearly four years. This moderation is primarily attributed to increasing competitive pressures, declining new orders, and the impact of US tariffs, despite continued strong demand from clients.
UAE Non-Oil Sector Growth Hits Near Four-Year Low
Growth in the UAE’s non-oil private sector decelerated sharply in May, with the S&P Global UAE Purchasing Managers’ Index (PMI) falling to 53.3 from 54.0 in April. This marks the lowest reading since September 2021, indicating a significant softening of momentum. While the index remains above the 50.0 threshold, signifying continued expansion, the rate of growth in output was the slowest in 44 months.
- The decline is largely due to:
- Increased competitive pressures.
- Weaker trade influenced by US tariffs.
- A notable drop in new orders.
Declining Orders and Subdued Optimism
New order growth, though still robust, softened considerably, with the sub-index dropping to 56.2 in May from 56.9 in April, marking a seven-month low. This indicates that while demand remains strong, the pace at which new business is being secured has slowed. Businesses also reported a record decline in inventories, as firms streamlined holdings in response to the cooling growth momentum. Furthermore, business expectations for future output were subdued, reaching their lowest level since January.
Employment and Cost Pressures
Despite the overall slowdown, employment growth in the non-oil sector reached its highest level in a year, as businesses continued to expand their workforce to manage existing workloads. This suggests a cautious approach to staffing, balancing current demands with a moderating economic outlook. Positively, input cost inflation eased significantly in May, reaching its lowest rate since December 2023, providing some relief to businesses.
Dubai’s Steady Performance
In contrast to the broader UAE trend, Dubai’s non-oil private sector maintained steady growth, with its headline PMI holding at 52.9 in May, unchanged from April. New orders in Dubai saw a four-month high, driven by improved client confidence and effective marketing strategies. However, inventory levels in Dubai fell for the first time in 2025, and job creation was described as mild, reflecting a similar cautious sentiment.
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.
- Here’s what the latest S&P PMI index says about the UAE, Gulf Business.
- UAE non-oil business activity growth picks up in October, PMI shows, Reuters.
