The UAE’s non-oil private sector gained significant momentum in August, offering fresh evidence that businesses are adapting to regional uncertainty and recovering from a period of weaker activity. Dubai was part of this improvement, recording a notable acceleration in business conditions as customer spending and international demand strengthened.
The latest figures point to a broader recovery across industries outside the energy sector. Companies reported stronger sales, higher output and increased purchasing activity, while supply conditions became more manageable. The improvement is particularly significant after several months in which geopolitical tensions disrupted trade routes, affected tourism and encouraged businesses and consumers to take a more cautious approach to spending.
According to The National, the seasonally adjusted S&P Global UAE Purchasing Managers’ Index increased to 55.3 in August from 52.7 in July. The result represented the strongest improvement in operating conditions since December 2024. A PMI reading above 50 indicates expansion, while a figure below that threshold signals contraction.
New Orders Give the UAE Economy Fresh Momentum
A major driver of the August improvement was the rapid increase in new business. New orders expanded at one of the strongest rates recorded in more than two years, while company output reached a six-month high.
Businesses linked the stronger performance to improving customer activity, progress on existing projects and a gradual reduction in logistical difficulties. Export demand also increased for a second consecutive month after declining during much of the second quarter.
The change suggests that the recovery is becoming more broadly based. Rather than relying on a single industry, growth is being supported by activity across manufacturing, services, construction, retail and other areas of the private economy.
Supply-chain conditions also showed signs of stabilisation. UAE companies increased purchasing during August and accumulated input inventories at the fastest pace in almost three years. Some businesses have increasingly turned to domestic suppliers to reduce exposure to international disruptions and improve the reliability of deliveries.
This localisation strategy has become particularly important amid continuing geopolitical risks. Shorter supply chains can help companies maintain inventories and respond more quickly when demand changes, while reducing dependence on trade routes vulnerable to disruption.
Cost conditions provided another positive signal. Input price inflation across the UAE’s non-oil sector slowed to its weakest level since February, although companies continued to report higher costs for some commodities, including fuel, energy, cement, steel and chemicals.
Dubai Business Activity Rebounds
Dubai recorded an even more pronounced month-to-month improvement. The emirate’s PMI rose from 51.7 in July to 54.1 in August, indicating that business conditions strengthened considerably during the middle of the third quarter.
The recovery was supported by increased client spending and stronger export activity. Both output and new orders expanded at their fastest rates in six months, providing a clearer indication that private-sector demand is recovering after a relatively subdued period.
Companies in Dubai also accelerated inventory building. Input stocks increased at the fastest pace since December 2017, suggesting that businesses are preparing for continued demand and seeking additional protection against potential supply disruptions.
However, the August figures were not uniformly positive. Employment declined slightly, adding pressure on companies dealing with growing order books. The mismatch between stronger demand and cautious hiring contributed to an increase in unfinished work.
Dubai businesses also faced somewhat different cost conditions from companies across the UAE as a whole. Input costs in the emirate increased at the fastest rate in four months. This could become an important factor for margins if businesses continue to face intense competition and remain unable to pass the full increase in expenses on to customers.
The stronger PMI nevertheless adds to other indicators showing the resilience of Dubai’s diversified economy. Earlier official figures showed that the emirate’s GDP reached Dh232 billion in the first quarter of 2026, up 2.4% from the same period a year earlier. Wholesale and retail trade remained the largest contributor, while financial services, real estate, construction, information and communications also supported economic activity.
Businesses Prepare for Stronger Demand
One of the most important signals from the August survey was a rise in confidence about future activity. Business expectations for the next 12 months improved to their highest level since April, supported by stronger sales trends, expectations for new construction projects and hopes that regional tensions will gradually ease.
Companies are nevertheless maintaining a degree of caution. Hiring has not accelerated at the same pace as new orders, while geopolitical developments continue to influence investment decisions, tourism flows, logistics and international trade.
For Dubai, the coming months will therefore provide an important test of whether August marked the beginning of a sustained acceleration or primarily represented a rebound from weaker conditions earlier in the year.
The latest indicators provide reasons for optimism. Higher customer spending, recovering exports, faster output growth and aggressive inventory building show that companies are positioning themselves for stronger activity. At the same time, Dubai’s performance highlights the role of its diversified private sector in absorbing external shocks.
If demand continues to expand while supply constraints ease, non-oil businesses could enter the final months of 2026 with considerably stronger momentum than they had at the start of the summer. The challenge will be converting the recovery in orders and output into sustainable investment, employment and longer-term growth.