The UAE’s non-oil private sector maintained steady growth in May despite heightened geopolitical tensions in the Middle East and supply-chain disruptions that reached their most severe level since the Covid-19 pandemic, according to the latest business survey data.
The S&P Global UAE Purchasing Managers’ Index (PMI) rose to 52.6 in May from 52.1 in April, signalling continued improvement in business conditions across the non-oil economy. Although the reading remained below the long-term average of 54.3, it pointed to ongoing expansion during a period marked by trade disruptions and regional uncertainty.
The latest survey showed that output growth reached a three-month high, highlighting the ability of UAE businesses to sustain operations despite rising transport costs, delayed deliveries and softer external demand.
Around 21 percent of surveyed firms reported higher business activity during May, supported by stronger domestic demand, project expansion and government-backed initiatives. These factors helped offset challenges linked to supply-chain bottlenecks and increasing operating expenses.
A major source of disruption came from maritime restrictions affecting trade through the Strait of Hormuz, one of the world’s key shipping routes. Supplier delivery times deteriorated to their weakest level since April 2020, creating delays across multiple industries and driving up procurement costs.
Despite the disruption, businesses adapted by diversifying sourcing channels, managing inventories more carefully and maintaining customer relationships in an uncertain trading environment.
New business volumes continued to grow, though at a slower pace than historical norms. Export demand remained under pressure because of logistical challenges and geopolitical uncertainty, yet the decline in overseas orders eased considerably compared with April, suggesting firms are gradually adjusting to changing market conditions.
The softer pace of external demand also allowed companies to work through existing orders more efficiently. Backlogs of work increased at the slowest pace in nearly three years, giving firms greater flexibility to improve productivity and complete pending projects.
Employment growth remained positive, though hiring expanded at a more moderate rate. Businesses pointed to slower demand growth, higher costs and increased automation as factors shaping recruitment decisions. Even so, companies continued to add workers, reflecting confidence in longer-term prospects.
Input costs rose sharply during May, recording the second-fastest increase in almost two years. Transportation expenses, fuel prices and higher material costs were the main drivers.
However, many firms chose not to pass those higher costs on to customers. Selling prices declined slightly during the month, marking the first reduction since June 2025 as businesses focused on maintaining competitiveness and preserving market share.
Dubai’s non-oil economy followed a similar trend. The Dubai PMI rose to 52.0 in May from 51.6 in April, signalling continued growth despite weaker output expansion and worsening supplier delays.
David Owen, principal economist at S&P Global Market Intelligence, said maritime trade disruptions had created challenges across the economy but stressed that companies largely viewed them as temporary.
He noted that business confidence remained strong, with firms expecting growth to recover as investment projects continue and regional trade flows improve. Survey findings showed that 12 percent of companies anticipate higher output over the coming year, supported by expanding opportunities and strong project pipelines.
