A. SREENIVASA REDDY (ABU DHABI)

The UAE’s non-oil private sector reported a “substantial rise” in new business in August, with the seasonally adjusted S&P Global UAE Purchasing Managers’ Index rising to 55.3 in August from 52.7 in July.

The PMI is a key indicator of business conditions in the manufacturing and services sectors. A reading above 50 signals expansion, while a reading below 50 indicates contraction.

S&P Global said sharper output growth, inventory expansion, easing supply constraints and lower price pressures contributed to the improvement.

“The improvement in operating conditions was the fastest recorded since December 2024,” the report said.

The upshift in growth was supported by a combination of stronger sales momentum and renewed stock building, the report said.

New work inflows rose steeply, at a pace that was the joint-quickest since March 2024. Companies reported an improvement in customer activity as economic caution arising from the Middle East conflict continued to ease, though not completely. Export demand also increased for a second consecutive month following declines throughout the second quarter.

Output rose at the fastest pace in six months, supported by higher order-book volumes, progress on existing projects, client digital migrations and reduced logistics challenges, the PMI report noted

However, companies found it difficult to keep pace with the rise in orders, resulting in a rapid build-up of unfinished work. Some firms said the pace of new orders had left them with insufficient time to scale up operations.

Companies stepped up purchasing activity and increased their inventories of inputs, helped partly by a greater reliance on local suppliers. The rise in input inventories was the strongest in nearly three years, contrasting with the muted stock-building trend seen in recent survey periods.

Greater trade flows and quicker deliveries from nearby suppliers helped ease input-cost pressures, with the rate of input price inflation falling to its lowest since February despite reports of higher prices for energy, fuel, cement, steel, and chemicals.

Average prices charged by non-oil businesses rose modestly. “While a number of firms lifted their charges because of rising costs and stronger demand, others commented on price promotions and fierce competition,” the report said.

Business expectations for the coming year improved in August to their highest level since April. The report attributed the rise in optimism partly to improving sales trends, expectations surrounding construction projects and hopes for an easing of regional tensions.

Commenting on the report, David Owen, Principal Economist at S&P Global Market Intelligence, said the UAE’s non-oil economy had “shifted decisively into a higher gear”, with the August PMI showing the fastest improvement in business conditions since December 2024.

“Demand growth accelerated, while delivery times improved and cost pressures softened, indicating a broad-based strengthening in domestic economic conditions,” Owen said.

He noted that businesses were increasingly switching to domestic suppliers as part of efforts to strengthen supply-chain resilience and circumvent geopolitical disruptions.

“Firms accumulated inventories at the sharpest pace in nearly three years, pointing to growing confidence in the demand outlook and efforts to limit the impact of potential future supply shocks,” Owen said.

Dubai PMI
The Dubai PMI rose to 54.1 in August from 51.7 in July, signalling a stronger improvement in business conditions.

“Dubai’s non-oil private sector experienced stronger business activity growth midway through the third quarter, as companies highlighted an uplift in client spending and an improvement in export trade,” the report said. Output and new-order growth both reached six-month highs.

The latest data also showed the fastest increase in input stocks since December 2017, while employment declined slightly, contributing to capacity pressures.

However, unlike the broader UAE trend, Dubai businesses reported stronger cost pressures in August, with total input costs increasing at the fastest rate in four months.