The UAE's non-oil private sector saw marginal improvement in May, though growth stayed below historical averages. The seasonally adjusted S&P Global UAE Purchasing Managers' Index (PMI) rose to 52.6 from 52.1 in April.
The reading signals improved operating conditions, but it remains well under the long-run average of 54.3. Output growth hit a three‑month high, yet the expansion rate stayed limited compared with typical survey results.
Regional geopolitical tensions and supply‑chain disruptions continued to weigh on the sector, pushing operating costs higher. Companies reported that these headwinds constrained expansion even as some firms noted stronger market demand and government‑backed projects.
Business Activity and Demand
About 21% of firms reported higher activity, linking the uptick to stronger demand, project expansion and government initiatives. At the same time, 10% of respondents said they faced downturns, citing geopolitical disruptions and rising operational costs. New business growth held close to April's 62‑month low, and a decline in export sales further pressured order books, although the pace of reduction moderated from the previous month.
Supply Chain and Costs
Supply‑chain conditions deteriorated in May. Delivery times lengthened for the second consecutive month and reached the greatest extent since April 2020. Restrictions in the Strait of Hormuz caused widespread input‑delivery disruptions, with panellists noting knock‑on effects across downstream sectors. The shock triggered the first drop in purchasing activity in nine months, prompting firms to curb normal buying patterns while some increased stockpiling to hedge future risks.
Employment Trends
Hiring slowed to its mildest pace since last October. Companies pointed to subdued demand growth, rising input costs and greater automation as reasons for constrained recruitment. Backlogs of work accumulated at the slowest pace in nearly three years, as firms found more capacity to address outstanding orders despite restrained sales growth.
Outlook
The modest PMI rise suggests that operating conditions are stabilising, but the sector remains vulnerable to external shocks. Analysts will watch upcoming PMI releases for signs of whether supply‑chain pressures ease and whether the non‑oil economy can regain momentum. Investors and policymakers alike will be keen on any shift in export trends or cost dynamics that could alter the growth trajectory.
Frequently asked questions
What does a PMI reading of 52.6 mean for the UAE non‑oil sector?
A PMI of 52.6 indicates the sector is expanding, but growth is modest and below the long‑run average of 54.3, showing improving yet constrained operating conditions.
Why did the UAE non‑oil PMI rise in May 2024?
The index edged up to 52.6 from 52.1 as firms reported stronger market demand, government‑backed projects and some expansion, though supply‑chain disruptions and higher costs kept overall growth subdued.
How are supply‑chain disruptions affecting UAE businesses in May?
Delivery times lengthened for a second month, reaching the worst levels since April 2020, especially after Strait of Hormuz restrictions, prompting firms to curb purchases, increase stockpiling and face higher operating costs.
Which factors are limiting hiring in the UAE non‑oil sector?
Hiring slowed to its mildest pace since last October because of subdued demand growth, rising input costs and greater automation, leading companies to limit recruitment despite some capacity gains.
What is the outlook for the UAE non‑oil PMI after May?
Analysts will watch upcoming data closely; the modest rise suggests stabilising conditions, but the sector remains vulnerable to external shocks such as geopolitical tensions and supply‑chain issues.
