Amna Assem

The UAE's non-oil private sector grew modestly in May, supported by output growth, while the effects of regional tensions and supply disruptions limited the expansion of activity.

The UAE, one of the world’s largest oil producers and with plans to increase the contribution of the non-oil private sector to GDP, is suffering as a result of the war that broke out last February, which led to the closure of the Strait of Hormuz, rising energy prices and disruption of supply chains, in addition to Iranian attacks against Gulf states as part of the fallout from the ongoing conflict.

The UAE Purchasing Managers’ Index (PMI) issued by S&P Global, which measures the performance of the non-oil private sector, rose to 52.6 points in May, up from 52.1 points in April.

The index shows a slight improvement in operating conditions during May, but the reading was well below its long-term average of 54.3 points.

What happened?

(According to the report)

Although output growth hit a three-month high in May, the rate of expansion remained limited compared to the rate typically tracked by the survey, and new business growth remained weak during May, registering a level close to its 62-month low recorded in April, amid ongoing regional tensions.

Backlogs of work rose at their slowest pace in nearly three years as firms found greater ability to handle and complete pending orders amid limited sales growth at the same time, and employment growth slowed to its weakest pace since last October.

Companies faced deteriorating supply chain conditions in May, with delivery times lengthening for the second time in three months and at the fastest pace since April 2020 as a result of restrictions in the Strait of Hormuz.

Due to the supply shock, May saw the first decline in purchasing activity in nine months after companies reduced their usual buying patterns. Although some companies resorted to increasing inventory as a precautionary measure, the decline in purchases resulted in a slight contraction in total purchasing inventory.

Input costs rose at their second-fastest pace in nearly two years. Purchase prices dominated this increase, driven by higher material costs and increased transportation fees. Despite this, companies resorted to lowering their selling prices for the first time since June 2025, albeit slightly, due to intense competitive pressures.

Future projections indicate that 12% of companies expect production growth during the next year, driven by strong projects and future orders under execution, along with hopes for improved and recovered market conditions.

(Prepared by: Omnia Assem, Edited by: Shaimaa Hefzy and Fatima El-Kashef, Contact: zawya.arabic@lseg.com )

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