The UAE’s non-oil business sector has experienced a fluctuating growth trajectory in recent months, marked by periods of robust expansion alongside notable slowdowns. This dynamic landscape reflects evolving demand conditions, competitive pressures, and strategic adjustments by businesses within the Gulf region’s most diversified economy.
Key Takeaways
- The UAE’s non-oil private sector growth has shown significant volatility, with the S&P Global Purchasing Managers’ Index (PMI) ranging from robust expansion to near four-year lows.
- New order growth has been a key indicator of this fluctuation, experiencing both sharp increases and sustained moderation.
- Employment trends have varied, with periods of accelerated hiring to clear backlogs and support new business, contrasted with the weakest growth in nearly three years due to recruitment challenges.
- Business optimism has also seen shifts, with firms expressing both strong confidence in future growth and subdued expectations due to competitive pressures and cash flow concerns.
A Rollercoaster of Growth: UAE Non-Oil Sector’s Recent Performance
The UAE’s non-oil private sector has navigated a period of significant ebb and flow, as indicated by recent S&P Global Purchasing Managers’ Index (PMI) data. While January 2025 saw robust expansion with a PMI of 55.0, slightly down from December’s 55.4, subsequent months presented a more moderated picture. March 2025 witnessed a slowdown, with the PMI slipping to 54.0 from 55.0 in February, marking the slowest growth since September. This trend continued into May 2025, where the PMI dropped to 53.3, its lowest reading in nearly four years, reflecting a softening momentum despite continued strong demand.
Demand Dynamics and New Orders
New order growth has been a critical barometer of the sector’s health. In January 2025, new orders rose sharply, though at a slightly slower pace than the previous month. However, March saw new order growth slow for the third consecutive month, reaching its weakest reading since October. While April experienced a slight quickening in new order growth, driven partly by international demand, May’s pace, though still robust, was the softest in seven months. This suggests a nuanced demand environment, where underlying strength is present but subject to competitive pressures and external factors.
Employment and Operational Challenges
Employment trends within the non-oil sector have been mixed. While April 2025 saw employment rise at its fastest pace in 11 months, as firms sought to reduce workloads and support new business, March presented a different scenario. Employment growth in March hit its weakest level in nearly three years, with firms struggling to find suitable candidates. Operational challenges, such as capacity pressures and rising backlogs, have also been noted, with some firms facing payment delays that impacted their ability to complete existing work.
Business Sentiment and Future Outlook
Despite the fluctuations, UAE firms generally maintain a degree of optimism regarding future growth. This is often supported by strong sales pipelines and national infrastructure development. However, this optimism has not been unwavering. In January 2025, total confidence was at its lowest level since December 2022, due to strong competition and cash flow concerns. Similarly, business expectations for future output in May 2025 were subdued, falling to their lowest level since January. This indicates a cautious optimism, where firms acknowledge growth opportunities but remain wary of ongoing challenges.
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.
