The UAE’s non-oil private sector showed signs of recovery in August, with the Emirates’ Purchasing Managers’ Index (PMI) rising to 54.2, up from a nearly three-year low of 53.7 recorded in July, according to a report by S&P Global. This rebound was primarily driven by a surge in business activity, bolstered by stronger new order intake, particularly from foreign clients.
Despite the positive movement, the rate of expansion in the non-oil private sector was the second slowest in over a year and a half, reflecting a moderated pace compared to earlier in the year. Developing a robust non-oil private sector remains critical for the UAE as it aligns with the broader economic diversification strategies pursued by Middle Eastern countries to reduce their dependence on oil revenues.
“Although the UAE PMI picked up in August and indicated solid expansion in non-oil business conditions, it remained weaker than earlier in the year as fewer companies reported increases in activity,” said David Owen, Senior Economist at S&P Global Market Intelligence.
The report highlighted that the improvement in international demand in August led to the sharpest rise in new export orders since October 2023. Despite this, businesses remain optimistic about sustained output growth over the coming year, supported by strong sales pipelines and a backlog of work that needs to be completed. Additionally, easing capacity constraints are expected to further support business activity.
However, the report noted that hiring growth across the non-oil sector weakened in August, marking the slowest pace in seven months. While some firms expanded their workforce to boost output, others reduced staffing levels.
The future business outlook also improved in August after declining to a six-month low in July, with firms expressing optimism about improving domestic economic conditions. Nonetheless, ongoing price mark-ups pose a potential risk to demand, introducing some uncertainty to the growth outlook.
In Dubai, operating conditions in the non-oil private sector improved at a stronger pace in August compared to July, driven by a quicker increase in new business inflows, with demand growth reaching a five-month high, according to the report.
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