UAE non-oil firms sharply raised prices in October amid rising confidence

UAE non-oil businesses sharply raised their selling prices in October as firms passed on an increase in operating costs to consumers, while confidence among companies also soared last month.

The seasonally adjusted S&P Global UAE Purchasing Managers' Index in September eased slightly to 54.8 in October, compared to 55.3 last month. But it remained above the 50 mark that indicates growth in economic activity.

Output prices were raised at the “sharpest rate” since the survey began in August 2009, the report said. Firms linked price rises to spiralling operating costs and efforts to protect margins.

Costs for companies also rose by the fastest pace since June 2022, driven predominantly by the higher purchase prices, the report said. Firms reported paying more for a wide range of raw materials, as well as fuel, energy, freight, maintenance, storage and rent.

“The unprecedented rise [in selling prices] reflected efforts to pass cost burdens on to customers, with firms feeling the impact of higher fuel prices and increased charges for critical materials,” said David Owen, principal economist at S&P Global Market Intelligence.

“The findings point to greater inflationary risks for the UAE economy in Q4, especially in the light of successive increases in petrol and diesel prices.”

Overall, the PMI was indicative of a “solid improvement in overall business performance”, the report said. New order growth and output continued to rise strongly, with business confidence improving to the highest since January.

Firms linked higher activity to sectors including construction, retail, tourism and manufacturing, although some noted restraints from regional conflict, competition and lower discretionary spending, according to the report.

New orders rose at a sharper pace than in September, supported by new clients and repeat business. The overall level of new export work rose at the quickest rate in two years.

However, employment levels fell fractionally in October, marking the third decline in the past five months. Some firms reduced headcounts to control costs, which offset hiring at others in response to rising sales, the report said.

“Order book levels grew at a faster rate in October, but capacity remains limited – signalled by another sharp increase in outstanding business,” Mr Owen said.

The UAE's economy has continued to grow this year driven by non-oil business activity, despite the impact of the Iran war.

The country's real gross domestic product grew 0.4 per cent annually to Dh961.9 billion ($262 billion) in the first half of 2026, the Federal Competitiveness and Statistics Centre said last month.

The non-oil sector's contribution to the GDP during the six-month period increased by 1.8 per cent, to 79.2 per cent, the FCSC said.

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“Looking ahead, non-oil firms are becoming more upbeat. Year-ahead expectations rose to their highest since January, underpinned by robust demand forecasts and hopes that improving regional conditions will lift sectors such as tourism,” said Mr Owen.

October’s PMI survey points to “continued expansion” in the UAE's non-oil private sector, said Daniel Richards, senior economist at Emirates NBD.

“Demand remained firm … although the after-effects of the regional conflict continued to disrupt trade and raise costs,” he added.

Dubai PMI at eight-month high

Non-oil private sector business activity in Dubai also rose sharply, reaching an eight-month high in October.

The Dubai PMI reached 54.6, up from 54.5 in September, signalling a “strong improvement” in business conditions, S&P said. The upturn was underscored by a sharp increase in new business volumes that was the joint-fastest since February.

Businesses also raised their output levels, but made modest reductions to staffing.

Similar to the UAE, Dubai non-oil firms also reported a record increase in selling prices in October, with companies mainly passing along rising input costs to customers.

“Local firms were more confident about future activity in October, but cost considerations meant that stockpiling efforts were less pronounced than in September,” the report said.