The latest

The UAE’s non-oil private sector gained momentum in August, with the seasonally adjusted S&P Global Purchasing Managers’ Index climbing to 55.3 from 52.7 in July, further above the 50 threshold separating expansion from contraction. The reading was the strongest since December 2024 and the second consecutive monthly improvement. David Owen, principal economist at S&P Global Market Intelligence, said the economy had “shifted decisively into a higher gear” as businesses adapted to a difficult operating environment.

Details

• Demand rebound: New business increased at the joint-fastest pace in more than two years, while output and purchasing strengthened. Customer activity recovered as conflict-related caution eased, though it remained present. Export demand expanded for a second month after falling throughout the second quarter. The improvement was broad-based rather than concentrated in a single component of the survey.
• War disruption: The conflict began on February 28 with Iranian missile and drone attacks on Gulf states and the closure of the Strait of Hormuz. Regional trade was disrupted, while aviation, tourism and hospitality suffered particularly heavy pressure, but non-oil activity avoided a sustained contraction.
• Local supply shift: Companies sharply increased domestic purchasing as overseas sourcing remained difficult, despite improved goods flows through Hormuz in recent months. Owen said surveyed firms were increasingly switching to local suppliers to circumvent geopolitical disruption and strengthen supply-chain resilience.
• Inventory buildup: Stocks of purchases rose at the fastest pace in nearly three years. The buildup reflected preparations for stronger demand and protection against renewed regional supply disruption. Greater reliance on local procurement also helped shorten delivery times during the continuing crisis.
• Domestic cushion: Returning families after the summer travel period and fewer Iranian attacks on Gulf states brought more activity to Dubai and Abu Dhabi as August progressed. Stronger domestic spending was expected to offset part of the sharp decline in foreign tourism.
• Cost relief: Input cost pressures softened even as business activity accelerated, giving companies relief from the combination of weak demand and rising expenses. The parallel increase in orders, purchases and inventories indicated growing confidence that demand could be sustained.

Between the lines

Business adaptation is reducing reliance on a rapid political settlement. Several rounds of mediated talks between Washington and Tehran failed to secure a peace agreement or a mechanism to reopen Hormuz fully. The IMF said Gulf economies maintained growth during the war, although at a slower pace, while foreign tourism and international supply chains remained under pressure.

What’s next

The next UAE PMI reading will show whether August’s acceleration carried into the following month, with new orders, exports, delivery times and inventories providing the clearest indicators while the 50-point threshold remains the dividing line between expansion and contraction.