UAE Non-Oil Private Sector Growth Holds Steady Amid Inflationary Pressures

The UAE’s non-oil private sector maintained its expansionary momentum in April 2025, with the S&P Global UAE Non-Oil Purchasing Managers’ Index (PMI) holding steady at 54.0—a reading that underscores resilience in a global economy still navigating uneven recoveries. This stability, now in its third consecutive month of growth, reflects a sector buoyed by strong demand, accelerating employment, and improving supply chain dynamics. Yet underlying challenges, including persistent cost pressures and unresolved work backlogs, suggest businesses are walking a tightrope between optimism and caution.

At the heart of the growth narrative is the surge in new orders, which expanded at the fastest pace since the index began tracking the metric. This demand-driven expansion has spurred hiring, with employment rising at the quickest rate in nearly a year as firms scramble to meet rising workloads. . Despite these efforts, backlogs of work remain elevated, though the rate of accumulation slowed to its weakest since October 2024—a sign that operational bottlenecks are gradually easing.

Supply chain improvements have also played a critical role. Supplier delivery times shortened at the fastest pace since August 2024, alleviating one of the key constraints that plagued businesses earlier in the year. This efficiency gain, combined with robust order inflows, has bolstered confidence among firms, which now sit at a 2025 high. Optimism is particularly pronounced in sectors like construction and services, where long-term infrastructure projects and tourism rebound are fueling activity.

However, the cost environment remains a headwind. Input prices rose sharply for the third consecutive month, driven by higher purchasing costs and wage inflation. Firms have passed these expenses to customers, though the rate of output price inflation slowed slightly in April. This balancing act raises questions about profit margins and consumer affordability, particularly as global inflation trends remain unpredictable.

The manufacturing subset of the non-oil sector mirrored the broader trends, with the PMI holding at 54.0—a figure historically above the long-term average of 54.68 since 2011. This consistency suggests that industrial activity, a key pillar of diversification, is weathering external shocks better than during the pandemic lows of April 2020.

Investors should note two critical takeaways. First, the UAE’s non-oil economy is no longer just a cyclical beneficiary of post-pandemic recovery but a structural growth story, underpinned by strategic investments in logistics, tourism, and technology. Second, while inflationary pressures may test corporate profitability in the near term, the sustained demand and hiring trends indicate that businesses are positioned to capitalize on long-term opportunities.

The data also highlights a divergence in risks. On one hand, the UAE’s robust order books and confidence levels suggest that the economy is insulated from short-term volatility. On the other, the lag in clearing backlogs and the reliance on global supply chains mean that external disruptions—such as a sudden spike in energy prices or a slowdown in tourism—could test this resilience.

In conclusion, the April PMI paints a picture of an economy at an inflection point. With the non-oil sector accounting for over 70% of UAE GDP, the stability in the PMI reading reinforces the country’s progress toward diversification goals. The 54.0 figure, sustained for two consecutive months, is a testament to structural strengths like strategic infrastructure projects (e.g., Expo 2020 legacies) and a business-friendly regulatory environment. However, the path forward hinges on managing cost pressures without stifling demand. For investors, this means prioritizing companies with pricing power, exposure to sectors like logistics or healthcare, and those leveraging UAE’s push into renewable energy and tech hubs. The numbers suggest the UAE’s non-oil story is far from over—it’s just entering its most dynamic phase.