UAE PMI Holds at 54.8 as Businesses Raise Prices at Record Pace

Key Takeaways

• The UAE’s non-oil private sector PMI eased to 54.8 in October from 55.3 in September, remaining above the 50 expansion threshold.
• Businesses raised selling prices at the fastest pace since the survey began in August 2009 as operating costs increased.
• Dubai’s PMI rose to an eight-month high of 54.6, highlighting resilient demand alongside pressure on margins.

UAE Non-Oil Businesses Keep Expanding Despite Cost Pressures

The UAE’s non-oil private sector continued to expand in October, but businesses faced a sharper increase in operating costs and responded with record increases in selling prices.

The seasonally adjusted S&P Global UAE Purchasing Managers’ Index fell to 54.8 from September’s 55.3, data released on November 4 showed. The reading remained comfortably above 50, signalling a further monthly improvement in business conditions.

The decline indicates a slower overall pace of improvement rather than a contraction. New orders accelerated, while output continued to rise strongly, leaving businesses balancing healthy demand against the need to protect profitability.

Stronger Orders Support Activity, but Hiring Remains Restrained

New business increased at a faster pace than in September, supported by new customers and repeat orders. Export orders recorded their strongest growth in two years.

Output growth eased only slightly from September’s seven-month high. Survey respondents reported increased activity across construction, retail, tourism and manufacturing, although some identified regional disruption, competition and weaker discretionary spending as constraints.

Employment nevertheless declined fractionally, marking the third reduction in five months. Some businesses reduced staffing to contain costs even as demand increased, contributing to a further accumulation of unfinished work.

The combination suggests that stronger sales are not translating uniformly into hiring. Companies may continue to prioritise productivity and cost control while assessing whether demand can sustain higher operating expenses.

Record Selling Price Increases Put Margins in Focus

Input cost inflation accelerated to its highest level since June 2022. Businesses reported higher expenses across raw materials, fuel, energy, freight, maintenance, storage and rent.

Companies passed some of those increases on to customers, pushing selling price inflation to its fastest pace in the survey’s history.

For businesses, the central question is whether price increases can offset higher costs without weakening sales volumes. Firms with stronger pricing power may be better positioned to protect margins, while those facing intense competition could find it harder to recover additional expenses.

However, the survey does not establish that profits improved. Rising selling prices can reflect an attempt to defend margins rather than an increase in profitability.

Dubai PMI Reaches an Eight-Month High

Dubai’s non-oil private sector recorded a modest improvement in its headline index. The Dubai PMI rose to 54.6 in October from 54.5 in September, reaching its highest level in eight months.

New business growth matched its fastest pace since February, supporting further increases in output. Dubai companies also reported record selling price increases as they passed higher input costs on to customers.

The UAE and Dubai readings therefore delivered slightly different headline signals, but shared the same underlying challenge: maintaining business growth while managing rising expenses.

The small increase in Dubai’s index should also be interpreted proportionately. It signals continued improvement in surveyed business conditions rather than a sudden acceleration across the entire economy.

What Higher Business Prices Mean for UAE Residents

The survey points to potential pressure on household purchasing power if businesses continue transferring costs to customers.

Residents may respond to higher prices by reducing discretionary purchases, comparing suppliers or prioritising essential spending. Such changes could affect retailers and service providers differently, depending on their customer base and product mix.

However, PMI selling price measures are not equivalent to the consumer price index. A record pace of price increases among surveyed businesses does not establish a record national inflation rate.

Official inflation data will be needed to assess how widely these business cost pressures are appearing in household expenses.

Demand Resilience Faces a Profitability Test

Business confidence improved to its highest level since January, supported by expectations of stronger demand and hopes for better regional conditions.

Supplier performance also improved, while businesses increased purchasing activity to meet expanding order books. These developments could help firms manage workloads, although they do not remove the pressure from higher costs.

For market participants, subsequent company results will help show whether stronger activity is translating into earnings growth. Revenue, margins, staffing and cash flow may provide different signals across sectors.

October’s survey presents a resilient non-oil economy facing a more difficult cost environment. Sustained demand supports growth, but the ability to manage expenses without undermining customer spending will remain central to business performance.

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