Activity in the UAE’s non-oil private sector experienced ongoing stagnation in May, as regional geopolitical conflict and severe supply chain constraints stemming from the near-closure of the Strait of Hormuz dampened market demand and inflated operational overheads. The headline S&P Global UAE Purchasing Managers’ Index ticked up slightly to 52.6 in May from 52.1 in April, though it remained significantly below its historical long-run average of 54.3. David Owen, Principal Economist at S&P Global Market Intelligence, observed that the prolonged halt in maritime trade generated a compounding negative impact across the broader domestic economy throughout the month.
This maritime bottleneck triggered a contraction in international export orders, driven by compromised shipping lanes and lingering anxiety regarding the longevity of the regional conflict. Consequently, overall expansion in new business remained suppressed, hovering near the 62-month low established in April. While the drop in foreign sales continued to drag down corporate order books, the velocity of this decline moderated compared to the previous month. Concurrently, supply chain efficiency deteriorated sharply, with vendor delivery turnarounds lengthening at the most rapid pace recorded since April 2020 as transport bottlenecks delayed critical raw material inflows across numerous industries.
On the expense front, soaring shipping and transport fees drove total input costs upward at the fastest rate witnessed in nearly two years. Despite facing these compressed margins, local enterprises responded to fierce domestic competition by offering modest price discounts to their clients. Nevertheless, corporate sentiment regarding the upcoming year remained resiliently positive, anchored by robust backlogs of potential projects and widespread anticipation of a broader macroeconomic stabilization. Meanwhile, the localized Dubai PMI offered a similar narrative of cooling momentum; the emirate’s non-oil reading edged to 52.0 in May from 51.6 in April, illustrating how elevated costs and cooler consumer demand continue to cap corporate output.
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