UAE non-oil private sector growth rebounds in September, PMI shows

The UAE's non-oil private sector experienced its strongest expansion in seven months in September, with the S&P Global UAE Purchasing Managers' Index (PMI) rising to 54.2 from 53.3, primarily driven by a sharp increase in new business and strengthening domestic demand. New orders grew at their fastest pace since February, recovering from a four-year low, and employment also advanced. Despite rising input costs, competitive pressures led to softened output price inflation, yet the sector maintains strong optimism for future output, with non-hydrocarbon GDP projected for robust growth in 2025-2026.

Analysis

The United Arab Emirates' non-oil private sector demonstrated its most robust expansion in seven months in September, as the S&P Global UAE Purchasing Managers' Index (PMI) rose to 54.2 from 53.3 in August. This solid improvement was primarily fueled by a significant recovery in domestic demand, with the new orders sub-index surging to 57.2 from a four-year low of 53.1. The strength in demand translated into tangible labor market gains, with employment levels advancing at their fastest pace since May. However, some underlying cautionary signals persist. Firms appear to be facing margin pressure, as rising input costs were met with softened output price inflation due to intense market competition. Furthermore, corporate caution is evident in the third consecutive monthly decline in inventory levels. Despite these headwinds, forward-looking sentiment remains strong, with 15% of surveyed firms expecting increased activity. This optimism is underpinned by projections for non-hydrocarbon GDP growth of 4.5% in 2025 and 4.8% in 2026, suggesting a sustained positive economic trajectory.

Key Decisions for Investors

• The strong PMI reading, driven by a rebound in domestic demand and employment, supports a constructive view on UAE-focused equities, particularly in consumer discretionary and domestic service sectors.
• Investors should closely monitor corporate profitability, as the data indicates potential margin compression from rising input costs that are not being fully passed on due to competitive pressures.
• The combination of high business optimism and strong official GDP growth forecasts for 2025-2026 warrants consideration of strategic, long-term allocations to the UAE's non-oil economy.