{"id":106267,"date":"2025-08-06T00:00:00","date_gmt":"2025-08-06T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/uae\/non-oil-sector-activity-hits-four-year-low-in-july\/"},"modified":"2025-08-06T00:00:00","modified_gmt":"2025-08-06T00:00:00","slug":"non-oil-sector-activity-hits-four-year-low-in-july","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/uae\/2025\/08\/06\/non-oil-sector-activity-hits-four-year-low-in-july\/","title":{"rendered":"Non-oil sector activity hits four-year low in July"},"content":{"rendered":"

The UAE\u2019s no<\/strong>n-oil private sector fell to its lowest level in over four <\/strong>years in July as re<\/strong>gional tensions continued to weigh on sales<\/strong>, with <\/span>the S&P Global PMI (pdf)<\/a> edging down to 52.9 in July, from 53.5 in <\/span>June<\/a>. The downtick was driven by a further weakening in new business growth in the non-oil economy, as client sentiment continued to suffer following an escalation of regional tensions in Iran and Israel in June. The deceleration was also attributed to a decrease in tourism activities and disruptions in global trade.<\/span><\/p>\n

(Tap or click the headline above to read this story with all of the links <\/strong>to our background as well as external sources.)<\/p>\n

Firms reported an uptick in new orders from the previous month<\/strong>, supported by client demand and a supportive price environment. However, the growth was the weakest since August 2021. The softer rise in new orders contributed to the slight easing in activity in July, further weighed down by mounting competitive pressures.<\/p>\n

\u201cNew order volumes helped firms to expand, but this trend is declining<\/strong>, with the latest data indicating the softest rise in incoming new work in almost four years,\u201d S&P Global Senior Economist David Owen said.<\/p>\n

On a positive note, overall output still grew at a strong pace<\/strong>, only slightly below the historical trend. Some businesses reported an increase in output due to new sales opportunities, higher client incomes, increased technological investment and clearing of backlogged work.<\/p>\n

Input cost pressures picked up slightly at the start of 3Q this year<\/strong>, after falling to a 23-month low in June. This was the fastest increase in prices since April and was mainly driven by higher costs for shipping, raw materials, wages and capital. In response, firms increased their own prices, following a slight drop from June. However, this new price increase was modest.<\/p>\n

Hiring momentum weakened in July<\/strong>, marking the slowest increase in four months. This came despite a significant rise in outstanding business, as the backlog of unfinished work grew at its fastest rate since January amid continued difficulties in meeting work deadlines.<\/p>\n

Optimism still held somewhat steady in July<\/strong>, with stronger demand anticipated, though confidence took a slight hit as some firms remain concerned over global economic uncertainty and increased competition.<\/p>\n

\u2026 but downside risks remain elevated:<\/strong> \u201cShould regional tensions ease, we may see a recovery in sales growth in the coming months,\u201d Owen said. \u201cThis would also be supported by the subdued price environment, with input costs rising only modestly despite the pace of increase reaching a three-month high. Nevertheless, the ongoing trends of rising competition, limited inventory, constrained hiring growth and relatively low confidence among surveyed firms suggest that downside risks remain elevated.\u201d <\/p>\n

The outlook for the region overall is also less than rosy:<\/strong> \u201cWe think that activity in non-oil sectors across much of the Gulf will continue to soften over the coming quarters,\u201d Capital Economics\u2019 James Swanston wrote in a recent research note seen by EnterpriseAM. \u201cLow oil prices will more than offset rising output volumes and, in turn, export receipts will be weaker this year than last,\u201d he explained. Current account and budget balances are also expected to deteriorate, prompting officials to \u201cmake fiscal policy less supportive,\u201d he added. <\/p>\n

OVER IN DUBAI-<\/p>\n

Dubai had a better month: <\/strong>Dubai\u2019s non-oil private sector restored momentum in July, lifted by a rebound in demand growth. The emirate\u2019s PMI increased to 53.5, up from a 45-month low of 51.8 in the previous month, indicating a strong improvement in operating conditions across the sector. \u201cEmirates NBD\u2019s Dubai Economy Tracker rebounded last month as the tourism and wholesale and retail trade sectors recovered from the disruption of the Israel-Iran conflict,\u201d Swanston noted.<\/p>\n

Sales rebound drives PMI recovery: <\/strong>A much sharper rise in sales volumes compared to June was a major factor behind the index\u2019s rebound. Firms cited improved business conditions and higher levels of new client enquiries, with firms in Dubai increasing output at the fastest pace in five months, while also continuing to boost employment and inventories.<\/p>\n

Input costs increased at the fastest pace since April<\/strong>, though overall inflationary pressures remained relatively mild in July. As such, non-oil companies increased their selling prices at the<\/p>\n

lowest rate in eight months.<\/p>\n

ELSEWHERE IN THE REGION-<\/p>\n