Dubai's Non-Oil Economy Maintains Momentum In August Amid Strong Output Growth

Dubai's non-oil private sector continued to show resilience in August, with business conditions improving at a steady pace, according to the latest data from S&P Global. The Dubai Purchasing Managers' Index (PMI) rose slightly to 53.6 from 53.5 in July, indicating a robust expansion in economic activity.

The uptick was driven by a notable increase in business output, which grew at the fastest rate in seven months. Survey respondents attributed this to stronger client demand and ongoing project activity. While new orders rose at a slightly softer pace than in July, overall sales remained healthy, supporting continued growth across key sectors.

Supply chain dynamics shifted modestly during the month, with delivery times lengthening for the first time since March 2024. This, combined with a strategic reduction in input purchases, led to a contraction in inventories. However, firms appeared to be managing stock levels efficiently in response to evolving market conditions.

Input costs rose for the second consecutive month, though the rate of increase remained moderate compared to broader UAE trends. Selling prices were adjusted upward for the ninth straight month, reflecting both higher costs and sustained demand.

Across the UAE, the non-oil economy also showed signs of resilience. The national PMI rose to 53.3 in August, up from 52.9 in July, remaining well above the neutral 50.0 mark. This signals an overall improvement in operating conditions, supported by a faster expansion in output and a rise in business confidence.

The increase in activity was the strongest in six months and slightly above the long-run average, with firms citing ongoing project work and growth in local markets as key contributors. Despite competitive pressures and some supply chain challenges, businesses remained optimistic about future prospects.

While the new orders index across the UAE eased to its lowest level since mid-2021, this was largely attributed to firms recalibrating their purchasing strategies and focusing on operational efficiency. Some companies noted that customs-related delays had affected vendor performance, but these were isolated and did not significantly impact overall output.

In response to shifting demand patterns, businesses adjusted their input purchases, leading to a measured reduction in stock levels. This strategic move reflects a broader trend of inventory optimization rather than a decline in market confidence.

Backlogs of work continued to rise, indicating sustained demand and a healthy pipeline of projects. This trend has been consistent since early 2024 and underscores the sector's ability to maintain momentum even amid evolving market dynamics.

David Owen, Senior Economist at S&P Global Market Intelligence, noted:“While sales growth moderated slightly in August, the UAE's non-oil private sector continues to show resilience. Output levels remain strong, supported by ongoing project activity and a solid base of client demand.”

He added that wage inflation, driven by healthy recruitment activity and cost-of-living adjustments, contributed to a rise in input costs. However, firms responded by adjusting selling prices in line with market conditions, ensuring continued competitiveness.

Employment across the non-oil sector saw a marginal uptick, reflecting businesses' confidence in future growth. Firms also reported improved output expectations, with sentiment reaching its highest level since October last year. Many cited stable domestic conditions and strong client relationships as key factors supporting their positive outlook.

Overall, August's data highlights the UAE's ability to navigate global economic shifts while maintaining a stable and growth-oriented business environment. With continued investment in infrastructure and diversification, the non-oil private sector remains a key driver of the country's economic resilience.

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