UAE non-oil business activity edges higher in May as demand pressures persist

Operating conditions in the UAE’s non-oil private sector saw a modest recovery in May, though the improvement masked deepening strains from regional geopolitical tensions and the worst supply-chain disruption since the pandemic.

The S&P Global UAE Purchasing Managers’ Index (pdf) rose to 52.6 in May, up from 52.1 in April, remaining comfortably in expansion territory but still running well below its long-run average of 54.3. That’s mostly due to a slight improvement in operating conditions and output growth despite ongoing supply chain disruptions, which weighed on export orders and input delivery times.

MENA economist Hamzeh Al Gaaod thinks the recovery can be attributed to the “positive sentiment on [the US and Iran] reaching an [agreement],” along with the persisting ceasefire.

The persistent issue for non-oil firms is the “cascading effect” of the maritime trade disruptions through the economy and the uncertainty over how long the conflict will last — both of which are suppressing export demand. “The UAE’s non-oil sector has been significantly impacted by the regional tensions and the consequent supply disruptions,” CIO at Century Financial Vijay Valecha tells EnterpriseAM.

Yes, but — could the impact have peaked? “The pace of decline of [export orders] eased notably from April, signaling the worst may be behind us,” he adds.