UAE Non-Oil Sector Hits New Growth Peak, PMI Data Shows

The UAE economy shows remarkable strength with the S&P Global UAE Purchasing Managers’ Index (PMI) reaching 55.0 in February 2025. This is a big deal as it means that the long-run average of 54.4 has been surpassed. The non-oil private sector keeps growing despite labor shortages and delayed payments. Business activity increased for 29% of surveyed companies compared to January’s numbers. New order growth dipped to 57.3 from January’s 59.0, yet the economic outlook remains optimistic. Companies now face increased cost pressures and market competition. Dubai’s PMI stands at 54.3, which highlights UAE’s diverse business landscape.

UAE PMI Signals Robust Economic Health

The UAE’s non-oil business activity kept strong momentum as the S&P Global UAE Purchasing Managers’ Index (PMI) stayed at 55.0 in February. This marks the second straight month at this level. The performance beats the long-term average of 54.4, which suggests ongoing economic strength.

PMI Maintains 55.0 Level for Second Month

The February PMI reading shows business conditions remain strong, though slightly below December’s nine-month peak of 55.4. About 29% of surveyed companies saw increased activity levels, while only 5% reported declines. David Owen, Senior Economist at S&P Global Market Intelligence, says this steady performance shows growth momentum has stayed strong since late 2024.

Output Growth Outpaces Historical Average

Business activity picked up speed throughout February and beat its historical trend. Companies boosted their output to meet rising new business levels. This strong expansion matches broader regional economic diversification initiatives, as shown by solid demand indicators.

The market got a boost from better advertising efforts and stable output prices. All the same, competition from local and international players somewhat affected order book growth. Businesses stocked up on input purchases, pushing inventory levels to their highest point in over a year.

The non-oil private sector faces some operational hurdles. The biggest problem comes from staffing limits that stop businesses from scaling operations quickly, even as order volumes grow. On top of that, companies worry about international competition and capacity issues.

The Emirates’ economic picture varies by region. Dubai’s PMI dropped to 54.3 in February from January’s 55.3, but businesses there still report strong growth in new orders and output. Business confidence hit a three-month high, though it stays below historical norms.

The year-to-date average beats the long-term trend of 54.4. This is a big deal as it means that the non-oil economy should grow by 5.0% in 2025. These numbers match earlier predictions and point to steady economic momentum throughout the year.

Business Leaders Report Mixed Sentiment

Private sector businesses in the UAE grew substantially in 2024, as total establishments increased by 12.6%. This growth aligns with the country’s economic diversification plans and market changes in early 2024.

29% Companies Show Higher Activity

A recent survey shows that 29% of businesses saw increased activity levels, while only 5% reported declines. The technology sector’s vitality stood out with a 20% rise in job openings. Banking and financial services also expanded their operations significantly.

Competition Intensifies Across Sectors

Business leaders worry about rising competition from local and international players. Many companies struggle to collect client payments, which strains their operations. The wholesale and retail sectors face especially tough competition that affects their pricing and market growth plans.

Employment Growth Remains Conservative

Business activity remains strong, but companies are cautious about creating new jobs. The private sector’s workforce grew by 11.43% in 2023, with skilled workers increasing by 8.9%. Most companies keep their staff numbers steady despite high output demands.

The UAE’s work environment continues to attract global talent, as shown by recent labor market data. The country’s unemployment rate dropped to 2.95% in 2023 from 2.97% in 2022. Economists believe this rate will reach 2.90% by 2024’s end.

Business confidence varies by location and industry. Dubai’s businesses seem less optimistic, with only 6% expecting output growth in 2025. The broader market stays resilient as better conditions and marketing efforts boost demand. Companies looking to expand face administrative challenges and tough competition, especially when seeking new business opportunities.

These private sector statistics highlight the nation’s efforts to develop its business sector comprehensively, matching the UAE’s priority sector focus. All these changes happen within legal frameworks that support development goals for coming decades.

Cost Pressures Return After Six-Month Break

UAE businesses face renewed cost pressures after six months of stability. Companies in the Emirates increased their prices for the second month in a row this February as they dealt with rising expenses.

Material Prices Drive Input Costs Higher

Material prices, maintenance needs, and staff costs pushed input costs up. The construction sector saw steep price hikes, and reinforced steel bar emerged as the biggest cost factor. Right now, material costs limit current activity according to 79% of those who responded.

Price pressures hit the mechanical, electrical, and plumbing sector hard. Copper cable prices jumped 19%. Work backlogs grew at their fastest rate in almost four years. Red Sea shipping disruptions caused these backlogs in part by delaying transport and raising operational costs.

Technology Investment Adds to Expenses

The MENA region’s software spending has become a major expense. It grew 11% year-on-year to USD 6.2 billion. Companies of all sizes now face higher technology costs in several areas:

• Custom software’s development and upkeep costs
• Third-party service integration fees
• Technology investments for compliance
• Infrastructure and security upgrades

These cost pressures led to a small uptick in selling price inflation during February. Companies still struggle to get payments from their clients – a problem deeply embedded in the market. Financial strain and fierce competition force businesses to balance their pricing carefully against market demands.

Rising costs might make businesses think over their growth plans, especially about creating new jobs. Market uncertainties and growing expenses have created this careful approach. Many companies now try to protect their margins through strategic pricing and better cost control.

Dubai’s Economy Shows Distinct Patterns

Dubai’s economy shows mixed growth patterns in different sectors, with its GDP growing 3.3% during the first nine months of 2023. Different industries in the emirate’s diverse economic portfolio show varying levels of progress.

Tourism Sector Guides Growth

The tourism sector in Dubai reached new heights in 2023. A record-breaking 17.15 million international overnight visitors came to the city, which surpassed the previous high of 16.73 million visitors in 2019. The accommodation and food services sector grew 3.7% to reach AED11.538 billion, making up 3.4% of the GDP.

Hotels and hospitality businesses managed to keep remarkable performance numbers. The average occupancy hit 77.4% in 2023, which is higher than both 2022’s 72.9% and 2019’s 75.3%. Room nights jumped to 41.70 million – an 11% increase from 2022. Revenue per available room went up by 6% compared to last year, reaching AED 415.

Visitors from Western Europe made up the biggest group at 19% of total arrivals. South Asia followed with 18%, while GCC countries contributed 16%. These strong numbers line up with Dubai’s goal of becoming the world’s top tourist destination.

Real Estate Activity Moderates

Real estate prices dropped for the first time in over two years. January 2025 saw average prices fall by 0.57% to AED 1,484 per square foot. This change comes after four straight years of exceptional growth, including a 30% jump in 2024.

The market set a new record with 14,413 transactions in January 2025. Off-plan projects kept their momentum strong as 53 new launches added 12,400 units. Emaar led the market with 16.5% share, followed by Damac at 15.8% and Danube at 5.3%.

Real estate played a big role in Dubai’s economic growth. The sector expanded by 3.6% in the first nine months of 2024 and represented 8% of the emirate’s GDP. Title deed transactions went up by 15.7%, showing investors had renewed interest in completed properties. Mortgage numbers stayed strong with 4,134 transactions, up 6.8% from the previous month.

UAE’s economic resilience continues to shine with PMI readings that exceed historical averages. This success shows strong growth momentum. The private sector adapts well to new challenges, with 29% of companies expanding their operations.

After a six-month break, cost pressures have returned. Companies now need to adjust their strategies while staying competitive. The job market remains stable, but companies are careful about adding new staff due to operational limits.

Dubai’s economic health shows strength across different sectors. Tourism has hit record visitor numbers, while the real estate sector goes through market changes. Dubai’s strong performance boosts UAE’s overall economy as it moves toward greater diversification.

UAE’s non-oil economy keeps growing steadily. The country looks set to reach its 5.0% growth target in 2024. Market trends suggest continued economic strength, but companies will need to handle competitive pressures and cost challenges in the coming months.