Dubai Posts Solid Gains As UAE Non-Oil Economy Shows Resilience

(MENAFN- Khaleej Times)

The UAE's non-oil private sector economy continued to show resilience in August despite signs of slowing demand, with Dubai emerging as a standout performer.

While new orders rose at the slowest pace since mid-2021, overall business conditions strengthened, output accelerated, and corporate confidence improved - underscoring the underlying momentum in the nation's diversification drive.

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According to the latest S&P Global Purchasing Managers' Index (PMI), the seasonally adjusted UAE headline index inched up to 53.3 in August from July's 52.9, signalling an overall improvement in operating conditions. .

Dubai's non-oil economy once again delivered robust results, with the emirate's PMI climbing to 53.6 from 53.5 in July. Companies reported their fastest output growth in seven months, supported by healthy client demand, new projects, and resilient local market conditions. The city also maintained its track record of strong selling activity, though order book growth was slightly softer compared to July.

Across the UAE, new business growth slowed to its weakest level in more than four years. Survey participants cited intensifying competition and supply chain challenges, with some noting delays in clearing goods through customs. Vendor performance showed only marginal improvement - the softest in nearly four years - highlighting pressures on logistics.

In response, firms scaled back their purchases of inputs for the first time since mid-2021. This marked the end of a four-year run of expansion in buying activity, leading to a further drawdown of inventories. Many businesses indicated that weaker sales momentum had reduced their appetite for stock building.

Backlogs of work, however, continued to mount sharply. Companies leaned on existing project pipelines to sustain activity, which pushed output to a six-month high. Panellists highlighted ongoing projects and domestic demand as key drivers of production growth despite the softer intake of new sales.

Cost pressures also intensified in August, with wages identified as the main driver. Firms raised salaries to retain staff and meet cost-of-living expectations, resulting in the fastest rise in average cost burdens since February. While purchase price inflation softened due to lower demand for inputs, the wage effect outweighed this, forcing businesses to lift their selling prices at the quickest pace in five months.

Employment trends were broadly positive, with companies modestly increasing staff levels to keep pace with workloads. The willingness to hire, despite cost pressures, suggested a healthy level of confidence in long-term growth prospects.

Dubai continued to set the pace in August. Businesses in the emirate reported strong expansion in output, reflecting both increased client sales and new project activity. While new order growth slowed slightly, companies remained upbeat, citing stable domestic demand and supportive local conditions.

The emirate did face similar supply chain pressures, with delivery times lengthening for the first time since March 2024. This contributed to the sharpest decline in inventories in over a year, as firms adjusted purchasing in line with easing demand. However, input cost inflation in Dubai remained below the nationwide average, giving businesses slightly more breathing space compared to peers in other emirates.

David Owen, senior economist at S&P Global Market Intelligence, observed that the UAE's non-oil private sector is experiencing a period of mixed signals.“Sales growth weakened again in August, easing for the fourth consecutive month and bringing the new orders index down to its lowest level since mid-2021,” he said.“The slowdown added to concerns of fading growth momentum and meant that output was increasingly reliant on backlogs of work.”

Owen added that the first drop in input purchases in more than four years underscored fading demand in the second half of 2025.

Despite these challenges, the survey found that business optimism in August was the strongest since October last year. Firms cited expectations of stable economic conditions, strong client relationships, and continued project activity as reasons for their positive outlook.

The divergence between easing demand growth and improving business confidence highlights the resilience of the UAE's non-oil sector. Companies appear to be adjusting to competitive pressures and logistical challenges while positioning themselves for longer-term opportunities.

For policymakers, the data underscores the importance of maintaining momentum in economic diversification and supply chain efficiency, as well as monitoring inflationary pressures that could impact consumers.

According to analysts, overall, the PMI results point to an economy that continues to expand at a steady pace. Dubai's strong performance offers reassurance that the country's growth engines remain intact, even as businesses navigate a more competitive and cost-sensitive environment.“With activity at a six-month high and confidence on the rise, the non-oil private sector is poised to remain a vital driver of the UAE's broader economic trajectory.”

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