In August, the UAE’s non-oil private sector remained robust, even as demand showed signs of slowing. Dubai, in particular, stood out as a leading performer.
Despite new orders growing at their slowest pace since mid-2021, business conditions improved overall, with increased output and enhanced corporate confidence, highlighting the momentum in the UAE’s diversification efforts.
The latest S&P Global Purchasing Managers’ Index (PMI) showed a slight rise in the UAE’s seasonally adjusted headline index to 53.3 in August, up from 52.9 in July, indicating better operating conditions.
Dubai’s non-oil sector delivered strong outcomes, with its PMI rising marginally to 53.6 from 53.5 in July. Companies reported the fastest output growth in seven months, driven by strong client demand, new projects, and stable local market conditions. Although the growth in order books was slower than in July, selling activities remained robust.
Across the UAE, new business growth hit its lowest in over four years. Participants pointed to increased competition and supply chain issues, with some experiencing customs clearance delays. Vendor performance improved slightly, marking the weakest improvement in nearly four years, indicating logistical pressures.
Consequently, firms reduced input purchases for the first time since mid-2021, ending a four-year expansion streak in buying activity and leading to further inventory reductions. Businesses cited weaker sales momentum as a reason for diminishing stock-building appetite.
Despite this, work backlogs surged significantly. Companies relied on existing projects to maintain activity levels, pushing output to a six-month peak. Panellists noted ongoing projects and domestic demand as key production growth drivers despite softer new sales intake.
August saw intensified cost pressures, with wages as the main factor. Firms raised salaries to retain talent and meet cost-of-living standards, resulting in the sharpest rise in average cost burdens since February. Although input purchase inflation eased due to lower demand, wage pressures led to the quickest increase in selling prices in five months.
Employment trends were generally positive, with companies modestly boosting staff levels to meet workloads. The willingness to hire, despite cost pressures, reflected strong confidence in long-term growth prospects.
Dubai continued to lead in August, with businesses reporting robust output expansion due to increased client sales and new project activity. While new order growth slowed, companies remained optimistic, citing stable domestic demand and favorable local conditions.
Similar supply chain challenges affected Dubai, with delivery times extending for the first time since March 2024, contributing to the steepest inventory decline in over a year as firms adjusted purchasing to match easing demand. However, input cost inflation in Dubai was below the national average, providing businesses with slightly more flexibility than peers in other emirates.
David Owen, senior economist at S&P Global Market Intelligence, noted that the UAE’s non-oil private sector is experiencing mixed signals. “Sales growth weakened again in August, slowing for the fourth consecutive month, bringing the new orders index to its lowest since mid-2021,” he said. “The slowdown raised concerns about dwindling growth momentum, making output increasingly dependent on work backlogs.”
Owen added that the first drop in input purchases in over four years highlighted weakening demand in the second half of 2025.
Despite these challenges, the survey found business optimism in August was the highest since last October. Firms cited expectations of stable economic conditions, strong client relationships, and continued project activity as reasons for their positive outlook.
The contrast between slowing demand growth and rising business confidence underscores the resilience of the UAE’s non-oil sector. Companies are adapting to competitive pressures and logistical challenges while positioning for long-term opportunities.
For policymakers, the data highlights the necessity of sustaining economic diversification momentum, enhancing supply chain efficiency, and monitoring inflationary pressures affecting consumers.
Analysts suggest that overall, the PMI results indicate a steadily expanding economy. Dubai’s strong performance reassures that the country’s growth engines remain robust, even as businesses navigate a more competitive, cost-sensitive environment. “With activity at a six-month high and confidence rising, the non-oil private sector is set to remain a crucial driver of the UAE’s broader economic trajectory.”
