New orders surge to a five-month peak and hiring resumes, but sentiment among firms weakens.
Dubai: The UAE’s non-oil private sector posted its strongest growth in four months in July, driven by the fastest rise in new orders since February and a return to hiring after June’s job cuts.
The seasonally adjusted S&P Global UAE Purchasing Managers’ Index (PMI) climbed to 52.7 in July from 50.8 in June, when it had dropped to its lowest level in over five years.
The latest PMI reading pointed to a moderate improvement in business conditions, supported by easing regional tensions, stronger consumer spending and demand generated by domestic infrastructure projects.
New orders hit five-month high
Businesses reported a gradual recovery in customer confidence in July, though constrained client budgets and heightened competition continued to weigh on demand for some firms.
Export orders returned to growth in July for the first time since March, with companies attributing the improvement to stronger regional activity. Although the increase was modest, it marked the fastest pace of export growth in a year.
Backlogs of work rose at the strongest rate in four months, driven by firmer customer demand and supply chain pressures linked to freight delays.
In response, companies raised output, with production growth gaining slight momentum in July, though it remained below the long-term average.
The July PMI data offered some relief for UAE businesses after the index came close to the 50.0 no-change mark in June. A recovery in business confidence and improved trade conditions helped support a renewed expansion in activity. While the July PMI reading of 52.7 remained below levels seen before the Middle East conflict, it suggested that companies were adapting better following a challenging second quarter.
— David Owen, Principal Economist at S&P Global Market Intelligence
Hiring resumes after June downturn
Employment returned to growth in July after companies recorded their sharpest workforce reductions in nearly six years in June.
Firms that added staff during the month largely linked the increase to stronger demand conditions.
However, business expectations for future output weakened for the third consecutive month, reaching their lowest level since March. Just 7% of surveyed companies anticipated higher output over the next 12 months.
“Despite the improvement, uncertainty surrounding conditions in the Strait of Hormuz continued to weigh on the outlook and kept cost pressures elevated in July. Companies found it difficult to fully pass these higher costs on to customers amid a highly competitive environment,” said David Owen, Principal Economist at S&P Global Market Intelligence.
“Firms also reported a decline in inventories despite a sharp increase in purchasing activity, indicating that stock levels remain tight and supply lead times are still extended.”
Supply delays weigh on inventory levels
UAE companies stepped up purchases of raw materials and other inputs at a strong pace in July, but inventories declined at their fastest rate since December 2025.
Businesses attributed the drop in stock levels to ongoing delays in imported shipments and shortages of key materials.
Supplier delivery times improved slightly, supported in part by smoother shipping activity through the Strait of Hormuz, though the improvement was less pronounced than in June.
Input cost pressures remained elevated, moving closer to the recent peak reached in April. About 10% of surveyed firms reported higher expenses for fuel, food, fertilisers, software and freight.
Staff costs rose at their fastest pace since February, although the overall increase remained limited.
Companies raised their selling prices again in July, but the pace of increase was modest as strong competition constrained their ability to fully pass on higher costs to customers.
Dubai’s PMI rises as new orders recover
Dubai’s PMI climbed to 51.7 in July from 50.7 in June, driven largely by a rebound in new business activity.
Companies recorded their strongest growth in new orders since March as customer demand improved. Business activity continued to expand, although the pace of growth was the slowest since June 2021, weighed down by rising costs and heightened competitive pressures.
Business confidence regarding future output declined to a four-month low, while firms reported a significant increase in input costs and a moderate rise in selling prices.
Employment showed signs of recovery after Dubai companies reduced headcounts in June for the first time in 15 months.
