UAE’s non-oil economy grew at its fastest pace since 2024 in August — but hiring fell for the second time in three months

The UAE's non-oil private sector had its best month in almost two years in August — but the recovery comes with an asterisk. The headline S&P Global UAE PMI (pdf) climbed to 55.3 last month from 52.7 in July, the fastest improvement in business conditions since December 2024 and the second straight month of accelerating growth following June’s five-year low of 50.8. Even so, employment fell for the second time in three months — the first stretch of multiple monthly declines in a single calendar year since 2021, David Owen, S&P Global’s principal economist, tells EnterpriseAM.

New business grew at its joint-fastest pace in more than two years, and export orders posted a second consecutive monthly expansion after a rough second quarter. Vendor performance improved too, easing input-price inflation even as firms faced higher costs for energy, fuel, cement, steel, and chemicals. Owen said the non-oil economy has “shifted decisively into a higher gear.”

The recovery also comes as firms “are adapting more effectively to the current market environment,” whether through hedging their supply chains by switching to domestic suppliers, easing delivery times, or by raising prices amid heightened competition.

Output rose at its fastest clip in six months. But firms are struggling to keep pace: the rapid build-up of new orders left some companies with insufficient time to scale up operations, and a growing backlog of unfinished work is the result. Teams haven’t grown much either, “reflecting a degree of hesitancy to commit to long-term capacity expansion,” Owen said, citing ongoing uncertainty around the regional conflict.

Dubai told a similar story, with one wrinkle. The Dubai PMI rose to 54.1 in August from 51.7 in July on stronger client spending and export trade. But input costs there rose at the fastest rate in four months, even as national cost pressures eased — and stock-building hit its quickest pace since December 2017.

What’s next

Will the recovery hold? Owen tells us that the domestic sourcing shift should leave firms more resilient to fresh supply shocks, having built up inventory buffers. Hiring is the bigger question mark — but he notes employment typically lags sales, and sales volumes that weakened during the peak of the conflict have since rebounded, which suggests staffing could recover in the months ahead too.

How sustainable is the local-sourcing switch? “It’s possible that some of the shift [toward] domestic sourcing will unwind if international supply chains normalize and imported inputs regain a cost advantage,” he tells us. “However, this period of disruption has encouraged firms to diversify and enjoy the benefits of having local suppliers, so some businesses may choose to retain stronger local relationships as part of a broader risk-management strategy to mitigate against any possible future supply shocks. The extent of this switch will likely depend on the relative competitiveness of domestic suppliers.”

A fresh escalation could trigger another pullback in demand, Owen says, much like what happened in 2Q 2026 — though firms’ 12-month growth expectations, as of August, are holding roughly in line with their 2025 average.