The United Arab Emirates’ non-oil private sector continued to expand strongly in October as businesses received more orders and increased sales. However, companies also faced rising expenses and raised their prices at the fastest rate recorded since the survey began.
The latest business survey showed that demand remained strong across several parts of the economy. Companies reported growth in construction, retail, tourism and manufacturing. New export orders also increased at their fastest pace in two years.
The seasonally adjusted S&P Global UAE Purchasing Managers’ Index fell slightly to 54.8 in October from 55.3 in September. Despite the decline, the index remained well above 50, the level that separates economic growth from contraction.
A reading above 50 indicates that business activity is expanding. The latest figure therefore suggests that the non-oil private sector continued to grow, even as companies dealt with higher operating costs and pressure on profit margins.
David Owen, principal economist at S&P Global Market Intelligence, said selling prices across the UAE’s non-oil private sector increased at a record pace in October. He added that inflation in input costs had reached its highest level since June 2022.
Businesses reported higher costs for raw materials, fuel, energy and freight. These increases made it more expensive to produce goods, deliver services and manage daily operations.
Many companies responded by passing a larger share of these expenses on to customers. The survey found that selling charges rose at the fastest rate since data collection began in August 2009.
This trend could become a concern for consumers and businesses if higher prices continue. Companies may face pressure to protect their earnings, while households could have to spend more on goods and services.
Despite the rise in costs, business output remained strong. Growth slowed only slightly from September, when activity reached its highest level in seven months.
Construction firms reported stronger activity, supported by demand for projects and related services. Retail businesses also benefited from increased orders, while tourism and manufacturing contributed to the wider expansion.
However, not all companies reported equally positive conditions. Some businesses pointed to regional conflict, stronger competition and weaker spending on non-essential goods and services.
These concerns suggest that the private sector continues to face risks even as demand improves. Regional tensions can affect trade, transport and business confidence. Competition can also limit how much companies are able to raise prices.
New orders increased at a faster pace than in September. Firms said they had attracted new customers and received more repeat business from existing clients.
Export demand was another positive part of the report. New export work rose at its fastest rate in two years, indicating stronger interest from customers outside the UAE.
The increase in orders may support business activity in the coming months. However, companies will need to manage higher costs and ensure that rising prices do not weaken customer demand.
Employment conditions remained more challenging. The survey recorded a slight decline in staffing levels, marking the third fall in five months.
Some companies reduced their workforces as they tried to control expenses. The small drop in employment came despite strong output and a rise in new orders.
This gap between demand and hiring may reflect efforts by businesses to improve efficiency. Companies could be trying to handle more work without increasing their labor costs.
The reduction in staffing also contributed to a sharp rise in outstanding work. Backlogs increased again as companies struggled to complete orders on time.
Although the pace of backlog growth was the slowest in three months, the increase remained significant. A growing volume of unfinished work can indicate that businesses are finding it harder to match production capacity with incoming demand.
The October survey presents a mixed picture of the UAE economy. Strong new orders, rising exports and continued output growth point to healthy activity in the non-oil sector.
At the same time, record selling price increases and higher input costs show that inflationary pressure is building. The slight fall in the headline PMI also suggests that growth has eased from September’s stronger level.
The decline in employment adds another concern, particularly if firms continue to cut staff while order books remain busy.
The UAE’s non-oil economy has become an important part of its efforts to diversify beyond energy production. Continued growth in construction, tourism, retail and manufacturing will be important to that strategy.
For now, the latest figures show that businesses remain active and demand is improving. The key challenge will be maintaining that momentum while controlling costs, protecting jobs and avoiding further pressure on customers.
