RIYADH: The UAE’s non-oil private sector continued to expand in June, despite recording its weakest growth in more than five years, as the S&P Global Purchasing Managers’ Index fell to 50.8.
The slowdown, from 52.6 in May. came as geopolitical disruptions, cautious client spending and intense competition weighed on business activity, although resilient domestic demand and continued public investment helped keep the non-oil economy in expansion territory.
Employment also declined at its fastest pace since August 2020, according to a statement.
June’s softer PMI reading comes against a backdrop of continued economic diversification in the UAE. According to the Ministry of Economy and Tourism, the country’s non-oil economy expanded 5.3 percent year on year in the first quarter of 2025, with non-hydrocarbon activities accounting for 77.3 percent of real gross domestic product, underscoring the sector’s growing role in driving overall economic growth.
The UAE’s long-term strategy remains focused on strengthening non-oil industries through the “We the UAE 2031” agenda, which aims to raise the country’s GDP to 3 trillion dirhams ($816 billion) by the next decade through expanding sectors including manufacturing, tourism, technology and financial services.
“The robust nature of the drop in employment underscores the hit to firms from the double whammy of soft client demand and rising cost burdens,” said David Owen, principal economist at S&P Global Market Intelligence.
He added: “While there were modest signs of an improvement in June, new business growth remained relatively mild, as clients continued to delay spending and tourism activity remained sparse. Similarly, input price inflation was the slowest seen in four months but elevated overall, which led a number of businesses to prioritize cost controls over capacity expansions.”
Owen stated that recent moves toward an easing of geopolitical tensions in the region should help firms recover demand and normalize supply chains, with the greater movement of shipping along the Strait of Hormuz in June leading to shorter delivery times.
“That said, client caution has persisted so far, and businesses have sufficiently moved to cut staff capacity, suggesting that a rebound in the non-oil sector may turn out to be gradual,” the principal economist added.
The report further showed that total private sector activity grew at its slowest pace in five years in June, as the conflict in the Middle East weighed on growth. While construction projects, digital services expansion and strong sales pipelines provided some support, they were insufficient to offset broader weakness.
New business growth rose to a three-month high but remained below the historical average as customers delayed spending decisions.
Weaker tourism activity and elevated price pressures also weighed on demand. As a result, employment declined for the first time in more than four years, marking the sharpest contraction since August 2020. Firms cited softer demand, rising costs and productivity initiatives, with workforce reductions helping stabilize wage costs for the first time in nearly three-and-a-half years.
Dubai PMI
The report also showed that Dubai’s non-oil private sector recorded its weakest improvement since January 2021 in June, as the PMI fell to 50.7 from 52 in May amid only a modest rise in new business.
Sales growth was constrained by delayed spending decisions and reduced travel linked to regional conflict. Despite this, firms increased output at the fastest pace since March.
Companies also cut headcount amid limited capacity pressures and efforts to control costs, with job losses reaching their fastest rate in five-and-a-half years, albeit only marginally.
Input cost inflation eased but remained elevated, prompting firms to raise output prices after cutting them in May.
