UAE businesses are feeling the strain from higher oil, transport, and shipping costs, which are also weighing on new orders.
In April, UAE non-oil firms raised selling prices at their quickest pace in almost 15 years, driven by rising oil and transport costs, shipping disruptions, and softer customer demand.
Although the index remained above the 50-point threshold that separates growth from contraction, expansion slowed as export orders declined and domestic sales growth weakened.
“The UAE non-oil private sector showed a further loss of momentum in April, with operating conditions recording their weakest performance in more than five years,” said David Owen, Senior Economist at S&P Global Market Intelligence. “Severe restrictions on key shipping routes led to a sharp decline in exports, while rising cost pressures added further strain on businesses.”
“According to the survey, businesses lifted prices in April at their sharpest rate since June 2011, reflecting higher input costs being passed on to customers.”
Input cost pressures
- “Oil and transport were the most frequently cited drivers of higher input costs, while supply chains remained heavily constrained due to transport restrictions in the Strait of Hormuz.”
- “Companies also reported rising material costs, adding further pressure to operating expenses.”
- “Supply chain performance continued to be significantly disrupted by transport limitations in the Strait of Hormuz.”
Economist quote (reworded)
- “The resulting increase in selling prices—the fastest in nearly 15 years, according to the survey—highlighted rising inflation risks in the non-oil sector,” Owen said.
- “Firms are attempting to limit the impact where possible, with slower growth in hiring and purchasing, and some reports of wage reductions, but broad-based price pressures are still expected to weigh on consumer spending across the economy,” he added.
Final implication
- “As a result, consumers and clients may face higher prices across parts of the non-oil economy, even as businesses try to protect margins without further weakening demand.”
- “This suggests higher costs could be passed on to consumers in segments of the non-oil economy, as firms balance margin protection with efforts to sustain demand.”
New business and demand
- “New business continued to grow in April, but at the slowest pace in more than five years.”
- “While some firms reported new client wins and stronger demand, others pointed to weaker customer spending and softer tourism activity.”
Export orders
- “Pressure was more evident in export markets, where new orders fell sharply in April after shipping disruptions linked to Middle East tensions affected UAE activity.”
- “Excluding the pandemic period in 2020, the latest decline in foreign sales was the steepest since the survey began in August 2009.”
Output impact
- “The weakness in exports also weighed on output, with firms continuing to expand activity—supported by existing projects and infrastructure work—but at a noticeably slower pace than earlier in the year.”
Hiring and purchasing
- “Businesses responded by tightening costs where possible, with input purchases rising only modestly in April amid higher expenses, softer sales, and supply constraints.”
- “Hiring and purchasing activity slowed as firms sought to manage rising costs and weaker demand conditions.”
Hiring and wages
- “Hiring also slowed, with workforce numbers across the UAE’s non-oil private sector rising at the weakest pace so far in 2026.”
- “Salary inflation dropped to a 33-month low and remained only marginal, with some firms also reporting wage reductions, according to S&P Global.”
Overall business strategy
- “The data indicates that companies are attempting to maintain activity while limiting costs, as weaker demand growth and ongoing transport disruptions continue to affect supply chains.”
Dubai PMI update
- “Dubai’s non-oil private sector also lost momentum in April, with its headline PMI falling to 51.6 from 53.2 in March.”
- “This marked the lowest reading in 55 months, signalling the weakest improvement in business conditions since September 2021.”
Output and demand in Dubai
- “Output and new business growth softened further during the month, as the Middle East conflict weighed on spending and disrupted supply chains.”
- “Dubai’s output growth rate was the slowest in nearly five years.”
Cost pressures
- “Cost pressures continued to rise, driven by higher oil, transport and material prices.”
- “In Dubai, companies increased their charges at a rate still high by historical standards, although the pace of increase eased compared with March.”
Business outlook
- “Despite softer sales momentum and rising prices, UAE non-oil firms turned more optimistic about the year ahead.”
- “Output expectations rose to a three-month high in April, supported by strong sales pipelines, business opportunities and technological innovation.”
Economist comment
- “The underlying strength of the non-oil private sector, reflected in continued output growth, suggests firms expect expansion to persist over the next 12 months,” Owen said.
- “He added that strong sales pipelines, construction activity and expected gains from AI investment were key drivers of optimism.”
Overall summary
- “The April survey indicates that the UAE’s non-oil economy continues to expand, but at a slower pace, as businesses contend with higher costs, weaker export demand and more cautious customers at the start of the second quarter.”
