New business increased at the joint-fastest pace in more than two years
A sharp rebound in customer demand pushed the UAE’s non-oil private sector into its strongest expansion in nearly two years during August, offering fresh evidence that businesses are adapting to regional disruption and regaining momentum after a difficult second quarter.
The seasonally adjusted S&P Global UAE Purchasing Managers’ Index rose to 55.3 in August from 52.7 in July, marking the fastest improvement in operating conditions since December 2024 and a second consecutive month of accelerating growth. A reading above 50 indicates expansion.
New business expanded at the joint-fastest rate in more than two years, while output growth accelerated to a six-month high. Companies reported improving customer activity as economic caution linked to the Middle East conflict gradually eased, although uncertainty had not disappeared completely.
New export orders also rose for a second consecutive month after declining throughout the second quarter, pointing to an improvement in international demand alongside stronger domestic sales.
Demand drives rebound
David Owen, principal economist at S&P Global Market Intelligence, said the UAE non-oil economy had moved “decisively into a higher gear,” with the August reading suggesting businesses were becoming more effective at operating in the current environment.
He said faster demand growth, shorter delivery times and easing cost pressure pointed to a broad improvement in domestic economic conditions.
The rebound represents a significant change from earlier in the summer.
The UAE PMI had fallen to 50.8 in June, its weakest level in more than five years, before recovering to 52.7 in July as client spending strengthened and some of the immediate disruption associated with the regional conflict began to ease.
S&P Global said in early August that UAE non-oil activity had stabilized after the sharp slowdown recorded in March, but growth remained below its pre-conflict pace. The latest August reading suggests the recovery strengthened considerably toward the end of the third quarter.
Export demand returns
The recovery was not restricted to domestic spending.
Export demand increased for a second straight month following declines through the second quarter, providing evidence that international business flows were also beginning to normalize.
That improvement aligns with stronger underlying UAE trade data. Non-oil foreign trade reached a record AED1.937 trillion in the first half of 2026, increasing 13.1 percent year on year. Non-oil exports rose even faster, climbing 23.9 percent to an all-time high of AED452.8 billion.
The UAE’s Comprehensive Economic Partnership Agreement network has also continued to expand, with 38 agreements signed since the program began in 2021, providing companies with greater access to overseas markets.
The PMI improvement in export orders therefore comes against a broader backdrop of rapid growth in the country’s non-oil trade.
Companies rebuild stocks
Businesses also stepped up purchasing activity substantially during August as stronger sales increased demand for inputs.
Stocks of purchased goods rose at the fastest pace in nearly three years,reflecting both stronger expected demand and efforts by companies to protect themselves against potential future supply disruption.
The shift is particularly notable because inventory accumulation had remained relatively restrained during previous months as uncertainty surrounding regional shipping routes affected procurement decisions.
Companies increasingly turned to domestic suppliers during August, helping improve delivery times and reduce sourcing difficulties.
Owen said businesses were actively strengthening supply-chain resilience through localization, with more companies using domestic suppliers to bypass geopolitical disruptions.
The trend adds an industrial dimension to the economic recovery: companies are not simply seeing more orders but also changing how they source and manage inputs in response to geopolitical risk.
Cost pressures ease
Improved supply conditions helped reduce inflationary pressure across much of the non-oil economy.
Overall input cost inflation eased to its lowest level since February, although companies continued to report increases in the cost of energy, fuel, cement, steel and chemicals.
Selling prices increased only modestly, although the rate of output-price inflation was the strongest in four months.
Some businesses raised charges to compensate for higher costs and stronger demand, while others continued offering discounts and promotions because of intense competition.
The combination of stronger demand and softer input-cost inflation is generally supportive for company margins, particularly after several months when supply disruption and elevated energy costs created pressure on operating expenses.
However, the regional energy backdrop remains volatile. Brent crude remained around $95 a barrel on September 3 as markets continued assessing renewed U.S.-Iran hostilities and risks to shipping through the Strait of Hormuz.
Hiring remains cautious
The clearest weakness in the August survey was employment.
Despite the sharp acceleration in sales and output, workforce levels declined for the second time in three months as businesses remained reluctant to commit to additional permanent capacity amid continued regional uncertainty.
That caution contributed to a rapid accumulation of unfinished work.
Demand increased quickly enough that some businesses were unable to expand their operating capacity at the same pace, pushing backlogs higher.
The divergence is significant because it suggests companies view the improvement in demand as real but are not yet entirely convinced it will persist long enough to justify faster hiring.
The UAE’s economy may therefore be entering a phase in which businesses first increase output through existing capacity, inventories and productivity before committing to larger workforce expansion.
Confidence improves
Businesses nevertheless became more optimistic about the year ahead.
Future output expectations reached their highest level since April, supported by stronger sales, anticipated construction activity and hopes that geopolitical tensions will ease.
The improvement comes after confidence weakened considerably earlier in the summer.
In July, only around 7 percent of surveyed businesses expected activity to increase over the following year, with uncertainty surrounding the Strait of Hormuz weighing heavily on expectations.
August therefore brought a stronger combination of current demand and future confidence, even though employment decisions remained conservative.
Dubai strengthens
Dubai followed the wider national trend.
The S&P Global Dubai PMI climbed to 54.1 in August from 51.7 in July, indicating a significantly stronger improvement in operating conditions across the emirate’s non-oil private sector.
Output and new orders both rose at their fastest rates in six months, supported by greater client spending and stronger export business.
Dubai companies also built input inventories at the fastest pace since December 2017, a particularly sharp change in purchasing behavior.
Employment nevertheless declined slightly, adding to pressure on operating capacity as demand strengthened.
Cost trends were also less favorable than at the UAE-wide level. Dubai businesses recorded their strongest rise in total input costs in four months, contrasting with the easing in overall national cost inflation.
The result nevertheless represents a substantial acceleration from July and reinforces the broader indication that the UAE’s major non-oil business centers entered the latter part of the third quarter with stronger momentum.
GDP base remains strong
The PMI rebound follows continued expansion in official non-oil GDP figures.
The UAE’s real economy grew 3 percent year on year in the first quarter of 2026 to AED485 billion, while non-oil GDP expanded 4.8 percent and increased its share of total economic output to 79.4 percent.
Financial and insurance activities led sectoral growth with a 17.3 percent expansion, followed by construction at 8.1 percent, healthcare at 7.7 percent and information and communications at 5.9 percent. Real estate expanded 4.8 percent and wholesale and retail trade grew 2.6 percent.
The first-quarter performance came after an exceptionally strong 2025.
Real GDP increased 6.2 percent to AED1.9 trillion last year, while non-oil GDP grew 6.8 percent to AED1.5 trillion. Construction, finance, real estate and transport were among the fastest-growing activities.
The August PMI does not measure GDP directly, but its broad coverage of manufacturing, construction, wholesale, retail and services makes it an important early indicator of private-sector economic momentum.
Conflict remains risk
The latest figures are also relevant because they follow warnings that the regional conflict could weigh heavily on the UAE’s 2026 economy.
An IMF staff mission in July said the UAE had demonstrated significant resilience because of strong fundamentals, large policy buffers, preparedness and rapid government action.
However, it also said uncertainty and intermittent disruption in the Strait of Hormuz were weighing on tourism, transportation, trade and real estate, contributing to a slowdown in non-hydrocarbon activity.
The IMF expected activity to strengthen during the second half if regional conditions gradually normalized, with exports recovering and non-oil sectors regaining momentum.
August’s PMI provides one of the clearest high-frequency indications so far that such a rebound may be taking shape.