UAE businesses raise prices at fastest rate as confidence rises

UAE non-oil businesses increased their selling prices at the fastest pace since records began in October, as companies passed rising operating costs on to customers amid stronger market demand. This is according to the latest S&P Global UAE Purchasing Managers' Index (PMI), released on Wednesday.

The headline PMI stood at 54.8 in October, slightly down from 55.3 in September. However, the reading remained above the 50-point mark, indicating continued growth in business activity across the UAE's non-oil private sector.

The report highlighted rising expenses for businesses, including fuel, energy, raw materials, freight, maintenance, storage and rent.

UAE Businesses Face Rising Operating Costs

Output prices increased at the sharpest rate since the PMI survey began in August 2009. Many businesses reported raising their selling prices to manage higher operating expenses and protect profit margins.

Input price inflation also accelerated, reaching its highest level since June 2022. Companies reported increased costs across several areas, including raw materials, fuel, energy, transportation, maintenance and commercial rents.

David Owen, Principal Economist at S&P Global Market Intelligence, said the latest findings indicate growing inflationary risks for the UAE economy during the fourth quarter.

He explained that businesses were passing higher costs on to customers, particularly due to rising fuel prices and increased charges for essential materials.

New Orders and Business Output Continue to Grow

Despite rising costs, demand across the UAE's non-oil business sector remained strong in October.

New orders increased at a faster pace than in September, supported by new customers and repeat business. Foreign demand also contributed to the growth, with new export orders recording their fastest increase in two years.

Business output continued to expand at a strong pace, although growth eased slightly from September's seven-month high.

Companies across construction, retail, tourism and manufacturing reported higher activity levels. However, some businesses experienced challenges linked to regional conflicts, market competition and reduced discretionary spending.

Employment Declines as Companies Manage Expenses

Employment across the UAE's non-oil private sector fell slightly in October, marking the third decline in the past five months.

While some businesses hired additional workers to manage increasing sales and customer demand, others reduced their workforce to control operating expenses.

Meanwhile, outstanding work continued to increase as new orders exceeded companies' capacity to complete existing projects. However, the rate of backlog growth was the slowest in three months.

According to David Owen, businesses appear focused on protecting their profit margins while managing recovering sales and higher operating costs.

UAE Business Confidence Reaches Highest Level Since January

Business confidence improved in October, with companies reporting their strongest expectations for activity over the coming 12 months since January.

Businesses attributed their optimism to stronger demand forecasts and expectations of improved regional conditions.

Tourism was among the sectors expected to benefit from better market conditions.

Purchasing activity also increased at its fastest pace in nine months as companies prepared to meet growing customer demand. However, stocks of purchased materials rose only marginally, recording their slowest increase since July.

Local Suppliers Help Businesses Manage Supply Challenges

Supply conditions improved during October, with vendor performance recording its strongest improvement since June.

Businesses reported better availability of local supplies and more responsive suppliers. The trend also reflects efforts by UAE non-oil companies to work with domestic vendors amid disruptions to international maritime routes.

The increase in purchasing activity and improved supplier performance are expected to help businesses manage growing order volumes towards the end of the year.

Dubai PMI Reaches Eight-Month High in October

Dubai's non-oil private sector also recorded stronger business conditions in October.

The Dubai PMI increased to 54.6 from 54.5 in September, reaching its highest level in eight months.

New business volumes rose sharply, matching the fastest growth rate recorded since February. Companies also increased output, while staffing levels experienced only modest reductions.

However, Dubai businesses faced similar cost pressures to the wider UAE market. Selling prices recorded a survey-high increase as companies passed higher input costs on to customers.

Overall cost pressures also accelerated to their fastest pace since June 2022.

Despite rising expenses, Dubai businesses expressed greater confidence about future activity, supported by stronger demand and expectations of continued business growth.

UAE Non-Oil Sector Maintains Growth Amid Inflationary Pressures

The October PMI results highlight continued expansion across the UAE's non-oil private sector, supported by stronger customer demand, export orders and business confidence.

However, record increases in selling prices and rising operating expenses remain important challenges for companies.

As businesses prepare for the final months of 2026, managing costs, maintaining profit margins and meeting growing customer demand will remain key priorities.