Non-oil sectors in UAE and Saudi Arabia maintain strong growth trajectory despite Iran war

The non-oil private sectors of the UAE and Saudi Arabia continued to experience robust growth in September, despite the ongoing Iran war. The Riyad Bank purchasing managers' index for the kingdom's non-oil economy rose to 55.3 in September, up from 53.8 in August, indicating a strong expansion. This marked the sixth consecutive month of improvement in business conditions.

The acceleration was primarily driven by a surge in new order growth, though output growth slowed. New orders approached the index's long-run average, suggesting demand had recovered after a mid-year slowdown. Businesses cited gradual market improvements, leading to more clients and higher spending. Naif Alghaith, chief economist at Riyad Bank, noted that the acceleration was demand-led, with new orders increasing at their fastest pace since February.

While the recovery was largely driven by domestic demand, new orders from foreign customers have declined for seven consecutive months due to supply chain disruptions caused by the regional conflict. Gulf states, including the UAE and Saudi Arabia, faced attacks during the war, impacting sectors like tourism, retail, aviation, and properties.

The UAE also saw a rise in selling prices at the fastest rate in over 15 years, as companies passed on higher input costs to customers. Despite this, business activity in Dubai increased sharply, with output growth at the fastest pace this year and new orders rising, particularly from foreign buyers for the second year in a row.