The UAE’s non-oil private sector continued to demonstrate strong economic activity in October, supported by rising customer demand, increased new orders and growing international business. However, businesses are facing mounting cost pressures, with selling prices increasing at the fastest rate recorded in the history of the survey.
According to the latest Purchasing Managers’ Index (PMI) released by S&P Global, the UAE recorded a PMI reading of 54.8 in October, slightly lower than September’s 55.3. Despite the decline, the figure remains comfortably above the 50-point threshold, indicating continued expansion across the country’s non-oil private sector.
The latest figures highlight the resilience of the UAE economy at a time when geopolitical tensions and regional disruptions are creating challenges for businesses. Strong domestic demand and continued government investment have helped maintain economic momentum despite the uncertain business environment.
Across the Gulf region, Saudi Arabia also recorded positive performance, with its non-oil PMI reaching 54 in October. Kuwait registered 52.9, while Qatar recorded 46.3, indicating a contraction in its non-oil private sector activity.
David Owen, Principal Economist at S&P Global Market Intelligence, highlighted the growing pressure on businesses, particularly from rising operating expenses.
He noted that selling prices across the UAE’s non-oil private sector increased at the fastest pace in the survey’s history during October. At the same time, input cost inflation reached its highest level since June 2022.
Businesses are increasingly passing higher operating expenses on to customers. Rising fuel prices and increased charges for essential materials have contributed significantly to the pressure.
According to Owen, these developments could create additional inflationary risks for the UAE economy during the fourth quarter, particularly following successive increases in petrol and diesel prices.
Business activity remains strong despite rising costs
Although the overall PMI eased slightly, business output continued to grow at a healthy pace during October. The slowdown was marginal compared with September, when activity reached a seven-month high.
Companies across construction, retail, tourism and manufacturing reported stronger business activity, reflecting continued demand across several important sectors of the UAE economy.
However, not every business experienced the same level of growth. Some companies reported challenges linked to regional conflicts, increased competition and reduced consumer spending on non-essential products.
New orders recorded stronger growth in October compared with the previous month. Businesses attributed the improvement to attracting new customers and receiving additional orders from existing clients.
International demand also provided a positive contribution. New export orders increased at their fastest pace in two years, highlighting the growing importance of overseas markets for UAE-based businesses.
Despite stronger demand, employment conditions remained challenging. The survey showed a slight decline in employment during October, marking the third reduction in the past five months.
Some companies reduced their workforce to manage increasing operational expenses, while others continued hiring to meet growing customer demand.
Business confidence reaches its highest level since January
One encouraging development was the improvement in business confidence.
Companies participating in the survey expressed stronger optimism about their business prospects over the next 12 months. Expectations for future activity reached their highest level since January.
The improved outlook was largely supported by expectations of continued customer demand and hopes that regional economic conditions would become more favourable.
This growing confidence suggests that businesses remain positive about the UAE’s long-term economic opportunities, even as they navigate rising costs and geopolitical uncertainty.
Dubai’s non-oil sector records stronger performance
Dubai also maintained positive momentum, with its PMI increasing to 54.6 in October, compared with 54.5 in September.
According to S&P Global, the improvement was driven by a strong increase in new business volumes. The growth rate matched the fastest pace recorded since February.
The latest reading reflects continued strength in Dubai’s business environment, supported by demand across its diverse economic sectors.
What the latest figures mean for the UAE economy
The October PMI results present two important developments for the UAE economy.
First, the non-oil private sector continues to expand, demonstrating that demand, business activity and international opportunities remain important drivers of economic growth.
Second, rising operating expenses are becoming a serious concern. Businesses may need to adjust their pricing strategies, manage resources more carefully and improve operational efficiency to protect their profitability.
For consumers, higher business costs could translate into more expensive goods and services. For companies, particularly small and medium-sized enterprises, maintaining competitiveness while managing expenses will remain an important challenge.
The UAE’s economic performance continues to reflect the strength of its diversification efforts. However, sustaining that growth will depend not only on attracting new business but also on helping companies manage inflationary pressures and adapt to changing regional and global conditions.
October’s figures ultimately deliver a mixed but encouraging message: the UAE’s non-oil economy is still growing, business confidence is improving, and international demand is strengthening. The challenge ahead is ensuring that rising costs do not weaken the momentum businesses have worked hard to build.
