New Orders Rise Sharply and Cost Pressures Ease as Employment Falls for Second Month.
Dubai: UAE businesses recorded their strongest improvement in operating conditions since December 2024 in August, driven by a surge in customer demand, stronger export activity and fewer supply disruptions. However, companies remained cautious about increasing their workforce.
The S&P Global UAE Purchasing Managers’ Index (PMI) rose to 55.3 in August from 52.7 in July, marking the second consecutive month of faster growth in the non-oil private sector.
New business rose at the joint-fastest pace in more than two years, while output growth reached a six-month high, pointing to a stronger third quarter for companies across the non-oil economy.
Companies reported stronger customer activity alongside a gradual, though incomplete, easing of economic uncertainty linked to the Middle East conflict. Export orders also increased for a second consecutive month after declining throughout the second quarter.
“The UAE’s non-oil economy has shifted decisively into a higher gear, with August’s PMI reading of 55.3 marking the fastest improvement in business conditions since December 2024 and suggesting that firms are adapting more effectively to the current market environment,” said David Owen, Principal Economist at S&P Global Market Intelligence.
Demand rises, hiring remains cautious
Stronger sales did not translate into increased hiring in August, with employment declining for the second time in three months.
New orders grew rapidly, leaving some companies unable to expand their operations at the same pace and resulting in a sharp increase in unfinished work. Firms also remained cautious about adding staff amid uncertainty surrounding the regional conflict and its broader economic impact.
Owen said accelerating demand, improving delivery times and easing cost pressures pointed to stronger domestic economic conditions. However, he noted that the decline in employment showed companies remained cautious about committing to longer-term capacity expansion.
Businesses turn to local suppliers
Companies increased purchasing activity and built inventories at the fastest pace in nearly three years, marking a significant shift from the subdued stock accumulation seen in recent months.
More businesses also turned to local suppliers, helping to ease sourcing challenges and improve delivery times. Increased trade flows and faster deliveries from nearby vendors contributed to a slowdown in input cost inflation, which fell to its lowest level since February.
Businesses continued to report higher prices for energy, fuel, cement, steel and chemicals, although overall cost pressures eased during the month.
“UAE businesses are actively building supply chain resilience through localisation, with surveyed firms increasingly switching to domestic suppliers to help circumvent geopolitical disruptions,” Owen said.
He added that the strategy helped shorten delivery times and boost purchasing activity, while the increase in inventories reflected efforts by businesses to prepare for stronger demand and reduce their exposure to potential future supply disruptions.
Prices rise modestly
Prices charged by UAE non-oil businesses rose modestly in August, marking their fastest increase in four months.
Some companies raised prices in response to stronger demand and higher input costs, while others continued to offer discounts and promotions amid intense competition.
Business confidence also strengthened, reaching its highest level since April, supported by improving sales, expectations of construction activity and hopes that regional tensions will ease.
Dubai growth strengthens, costs accelerate
Dubai’s non-oil private sector also recorded stronger growth in August, with its PMI rising to 54.1 from 51.7 in July.
Output and new order growth both reached six-month highs, driven by increased client spending and stronger export activity. Companies also increased their inventories at the fastest pace since December 2017.
Employment declined slightly, adding to capacity pressures as stronger demand placed greater strain on businesses.
Cost trends in Dubai differed from the broader UAE picture, with businesses reporting their fastest increase in total input costs in four months.
