The survey signals that the UAE economy is performing well, but the softer increases in output and new orders hint at momentum easing
In a positive sign for the labour market, employment growth reached its highest level in the UAE in a year, as businesses expanded their workforce to meet rising workloads, according to the latest data from the S&P Global UAE Purchasing Managers’ Index (PMI).
This increase in staffing came even as the pace of backlog accumulation softened, according to S&P. Hiring activity was supported by a continued increase in new orders, although many firms appeared to be balancing expansion with caution as broader economic conditions showed signs of moderating.
Employment growth was the strongest seen in exactly one year. Respondents often attributed this to elevated workloads, as rising new orders contributed to another sharp increase in backlogs of work. That said, the pace of accumulation did soften slightly to a 16-month low, according to the index.
Growth in the UAE’s non-oil private sector economy
The growth in the UAE’s non-oil private sector economy slowed notably in May. The headline index also fell to its lowest level in nearly four years, signalling a softer but still solid improvement in business conditions.
The seasonally adjusted PMI slipped to 53.3 in May, down from 54.0 in April. Although this marked the weakest performance since September 2021, the index remained above the 50.0 threshold that separates growth from contraction, pointing to continued expansion in the non-oil sector.
Despite the dip in the headline figure, demand conditions across the UAE remained resilient. Companies surveyed reported a sustained rise in new orders, supported by favourable demand, strong client relationships, effective marketing strategies, and a diverse range of products. However, the rate of increase slowed slightly compared to previous months.
As a result, business output also expanded, although the pace of growth moderated to its weakest since mid-2021. According to respondents, higher sales volumes continued to support activity, but some firms cited global economic uncertainty, particularly in connection with US tariffs, as a factor weighing on output levels.
David Owen, Senior Economist at S&P Global Market Intelligence, noted the implications of the latest data. “UAE non-oil firms signalled that growth had slowed in May, as the headline PMI fell to its lowest point since September 2021. Although businesses continued to welcome strong demand from their clients, there were some reports that competitive pressures and weaker trade amid US tariffs had weighed on growth,” he said.
“From an overall perspective, the survey signals that the UAE economy is performing well, but the softer increases in output and new orders hint at momentum easing. Furthermore, the sharp cutback in stocks (which was the fastest on record) and the broadly subdued outlook for activity suggest that firms are gearing up for softer growth,” Owen added.
Drop in inventory as firms adjust stock levels
One of the most striking developments in May was a record fall in input inventories, as businesses sought to streamline stock levels in response to cooling demand momentum. The drop in inventories coincided with a slowdown in backlogs of work, which grew at their weakest rate in 16 months.
While workloads remained elevated due to strong sales, firms appeared increasingly cautious about future activity levels, adjusting their supply chains and inventory holdings accordingly.
Cost pressures eased notably in May. Input price inflation slowed to its lowest rate since December 2023, providing some relief to firms. Only 5 per cent of respondents reported an increase in input costs compared to April, with some citing higher raw material and transport costs.
Meanwhile, selling prices increased for the fifth consecutive month, though the rise was marginal. Companies noted that efforts to pass on higher costs to clients were offset in some cases by the need to offer discounts to remain competitive.
“Positively, the survey data backs up the trend of falling inflationary pressures, as businesses saw input costs rise at their slowest rate since the end of 2023,” Owen commented.
Dubai sees growth
In Dubai, the PMI held steady at 52.9, unchanged from April and marking the joint-lowest reading since early 2022. Nonetheless, the figure indicated continued growth in the emirate’s non-oil private sector.
New orders in Dubai rose at a four-month high, supported by improved client confidence, effective marketing, and competitive pricing. Business activity expanded sharply, though the rate of increase remained among the weakest seen in four years.
Inventory levels in Dubai fell for the first time in 2025, while job creation was described as mild. Input cost inflation in the emirate also eased, reaching its lowest level in 17 months, helped by reduced inventory pressures.
The S&P Global United Arab Emirates PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 1000 private sector companies. The panel is stratified by detailed sector and company workforce size, based on
contributions to GDP. The sectors covered by the survey include manufacturing, construction, wholesale, retail and services.
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