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UAE non-oil private sector continues to grow despite regional headwinds: S&P Global
Domestic spending, government investment and improving supply chains continued to support business activity in June, although geopolitical tensions and rising costs weighed on hiring and growth.
- PUBLISHED: Fri 3 Jul 2026, 11:10 AM
The UAE's non-oil private sector remained in expansion territory during June, supported by resilient domestic demand, government investment and improving supply chains, although regional geopolitical tensions and higher costs moderated the pace of growth, according to the latest S&P Global UAE Purchasing Managers' Index (PMI).
The headline PMI eased to 50.8 in June from 52.6 in May. While this marked the weakest reading since February 2021, it remained above the 50-point threshold that separates expansion from contraction, indicating that business conditions continued to improve, albeit at a slower pace.
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S&P Global said resilient household spending and continued government investment helped underpin business confidence despite disruption from regional tensions. Companies also cited construction activity, expanding digital services and healthy sales pipelines as areas of continued strength.
Although overall output growth softened, new business increased for a third consecutive month and accelerated to a three-month high, suggesting customer demand remained positive despite some delays in spending decisions. Tourism activity and higher prices continued to weigh on parts of the economy.
The report also pointed to improving supply-chain conditions during June. Purchasing activity rebounded after declining in May as firms rebuilt inventories, while supplier delivery times improved at the fastest pace in four months following smoother shipping movements through the Strait of Hormuz.
Input costs remained elevated due to transport expenses and commodity prices, although inflationary pressures eased compared with previous months. Many firms chose to absorb part of the higher costs rather than fully pass them on to customers in order to remain competitive.
Employment declined for the first time in more than four years as some businesses adjusted staffing levels in response to softer demand and rising operating costs. S&P Global noted that the reduction also helped stabilise wage costs for the first time in nearly three and a half years.
David Owen, Principal Economist at S&P Global Market Intelligence, said businesses continued to face pressure from cautious customer spending and elevated costs, but noted that recent easing in regional geopolitical tensions should support demand and help normalise supply chains.
"Recent moves towards an easing of geopolitical tensions in the region should help firms recover demand and normalise supply chains," Owen said, adding that while any recovery may be gradual, businesses remained broadly optimistic about the outlook, particularly those benefiting from confirmed contracts and public-sector spending.
Dubai's non-oil private sector also remained in growth territory, with the Dubai PMI easing to 50.7 in June from 52.0 in May. Output growth strengthened to its fastest pace since March, although new orders were affected by softer travel activity and delayed customer spending linked to regional tensions.
