UAE non-oil growth hits fastest pace since 2024, but hiring slips

Dubai: UAE businesses saw their strongest improvement in operating conditions since December 2024 in August, helped by a surge in customer demand, stronger exports and fewer supply disruptions, although companies remained cautious about adding staff.

The S&P Global UAE Purchasing Managers' Index rose to 55.3 in August from 52.7 in July, signalling a second consecutive month of accelerating growth across the non-oil private sector.

New business increased 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 operating across the non-oil economy.

Companies reported an improvement in customer activity alongside a steady, though incomplete, easing of economic caution linked to the Middle East conflict. Export orders also expanded for a second consecutive month following declines throughout the second quarter.

Demand rises, hiring remains cautious

Stronger sales did not translate into increased hiring during August, with employment declining for the second time in three months.

New orders grew quickly enough to leave some companies unable to expand their operations at the same pace, resulting in a rapid increase in unfinished work. Firms also remained hesitant to take on additional staff because of uncertainty surrounding the regional conflict and its wider economic impact.

Owen said demand growth had accelerated while delivery times improved and cost pressures softened, pointing to stronger domestic economic conditions, but added that the decline in employment showed companies were still cautious about committing to longer-term capacity expansion.

Businesses turn to local suppliers

Companies stepped up purchasing activity and built inventories at the fastest rate in nearly three years, a marked change from the muted stock accumulation recorded in recent months.

More businesses also turned to local suppliers, helping reduce sourcing problems and improve delivery times. Greater trade flows and faster deliveries from nearby vendors contributed to an easing in input cost inflation to its lowest level since February.

Businesses still reported 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 contributed to shorter delivery times and stronger purchasing, while the build-up in inventories reflected efforts to prepare for demand and limit exposure to possible future supply disruptions.

Prices rise modestly

Prices charged by UAE non-oil businesses increased modestly in August, recording their fastest rise in four months.

Some companies raised prices in response to stronger demand and higher costs, while others continued to offer promotions amid strong competition.

Business confidence also strengthened, reaching its highest level since April, supported by improving sales, expectations surrounding construction projects and hopes that regional tensions would ease.

Dubai growth strengthens, costs accelerate

Dubai's non-oil private sector also recorded a stronger August, with its PMI rising to 54.1 from 51.7 in July.

Output and new order growth both reached six-month highs, supported by higher client spending and improved export trade, while companies increased their input stocks at the fastest pace since December 2017.

Employment fell slightly, adding to capacity pressures created by stronger demand.

Cost conditions moved differently from the wider UAE trend, however, with Dubai businesses reporting the fastest increase in total input costs in four months.