Latest S&P Global PMI report highlights solid employment growth and resilient demand in the UAE, despite signs of cooling output and inventory adjustments across non-oil sectors.
The UAE’s non-oil private sector economy continued to grow in May 2025, albeit at a slower pace, according to the latest S&P Global Purchasing Managers’ Index (PMI). The survey revealed that while business activity and new orders remained on an upward trajectory, growth momentum has begun to moderate, signalling a shift towards cautious optimism among UAE businesses.
The seasonally adjusted headline PMI fell to 53.3 in May from 54.0 in April, marking the lowest reading since September 2021. Though this represents a notable dip, the index remains firmly above the neutral 50.0 threshold, underscoring continued expansion.
Labour Market Shines Bright
In a significant positive, employment growth reached its highest level in a year, with businesses expanding their workforce to meet elevated workloads. Respondents to the PMI survey attributed hiring to a sustained increase in new orders and rising operational needs.
“Employment rose at the fastest pace in 12 months as companies responded to persistent demand pressures,” said David Owen, Senior Economist at S&P Global Market Intelligence. “However, many appear to be balancing expansion plans with greater caution.”
Despite the hiring surge, backlogs of work grew at their weakest rate in 16 months, indicating a softer pipeline of future activity.
Cooling Output and Business Sentiment
Although demand conditions remained generally strong—thanks to effective marketing strategies, strong client relationships, and diverse offerings—the rate of new order growth eased, and output expansion slowed to its weakest level since mid-2021.
Many businesses cited global economic uncertainty—including concerns about US tariffs—as weighing on confidence and suppressing production activity. Competitive pricing pressures also affected margins, as firms reported mixed success in passing on input costs to customers.
Inventories and Input Costs Under Review
One of the most notable developments was a record fall in input inventories, as firms moved to streamline their supply chains in response to slower demand. This sharp cutback in stock levels was the fastest on record, reflecting a more conservative business outlook.
Meanwhile, cost pressures continued to ease. Input price inflation in May fell to its lowest level since December 2023, providing much-needed relief. Only 5% of firms reported increased input costs month-over-month, with some citing minor upticks in raw materials and transportation.
Although selling prices rose for the fifth consecutive month, the increase remained marginal, with firms often offering discounts to remain competitive.
Dubai Maintains Stability
In Dubai, the PMI held steady at 52.9, matching April’s figure and marking the joint-lowest level since early 2022. Still, the reading points to continued growth in the emirate’s non-oil economy.
The city saw a four-month high in new orders, driven by improved client confidence, competitive pricing, and strong marketing. However, inventory levels dropped for the first time in 2025, and job creation remained mild. Input cost inflation in Dubai fell to a 17-month low, thanks in part to easing inventory pressures.
Outlook: Steady, But Cautious
David Owen summed up the sentiment: “While the UAE economy is still performing well, the softer increases in output and new orders suggest momentum is easing. Combined with record stock reductions and a subdued outlook, businesses are signalling a more cautious approach to the second half of the year.”
Compiled from the responses of around 1,000 purchasing managers across manufacturing, construction, wholesale, retail, and services sectors, the S&P Global UAE PMI offers a robust overview of the country’s economic pulse. And while the current signals point to resilience, the path ahead will likely depend on how firms navigate global headwinds and adjust their strategies in a more uncertain growth environment.
