The non-oil private sectors of the UAE and Saudi Arabia maintained their expansion trajectory in September, as the Arab world’s two largest economies shook off the effects of the Iran war.
The seasonally adjusted Riyad Bank purchasing managers’ index – a benchmark gauge of the kingdom’s non-oil economy – rose to 55.3 in September, from 53.8 in August, well above the neutral 50 mark that separates growth from contraction.
The rate of improvement in the non-oil sector business activity last month was the strongest since February and marked the sixth consecutive month of improvements in business conditions.
The acceleration last month was largely driven by a marked rise in new order growth, although it masked the softening in the rate of output growth.
New orders hit levels closer to the index’s long-run average, suggesting that demand in the kingdom has recovered well after a slowdown in the middle of 2026. Businesses surveyed also referred to gradual improvements in the market that led to increased client numbers and higher spending.
“The acceleration was primarily demand-led. New orders increased at their fastest pace since February,” said Naif Alghaith, chief economist at Riyad Bank.
The September reading of the PMI index was broadly consistent with the “wider picture of the Saudi economy”, which was driven by domestic consumption, investment activity, government and PIF-related projects. “The strong improvement in new orders provides a positive forward-looking signal for activity in the coming months,” Mr Alghaith said.
While the recovery was predominantly driven by the domestic market in September, new orders from foreign customers have now dropped for seven months running.
Companies surveyed pointed to the effects of supply chain disruption amid the regional conflict that in some cases led to shipping delays.
Gulf states including the UAE and Saudi Arabia, Opec’s biggest oil producer, have faced attacks during the war, which is now in its seventh month.
The tourism and leisure, retail, aviation and properties sectors across the Gulf took a hit as Iran attacked civilian infrastructure and regional energy installations during the early days of the conflict. Gulf economies have bounced back gradually, although Iran continues to attack commercial vessels in the Strait of Hormuz, while Saudi Arabia’s Red Sea ports are under a "maritime blockade" from Yemen's Tehran-backed Houthi rebels.
Demand drives UAE
Demand conditions in the UAE non-oil private sector also continued to improve markedly in September, boosting pricing power and enabling companies to raise their selling prices at the fastest pace in more than 15 years in response to higher input costs.
Meanwhile, business activity increased rapidly and higher output requirements encouraged companies to expand both purchasing activity and employment, with staffing numbers rising modestly last month.
The seasonally adjusted S&P Global UAE Purchasing Managers' Index in September remained stable at 55.3 recorded in August, well above the 50 mark that indicates growth in economic activity. The latest PMI reading is “another indication that the non-oil economy has moved past the midyear slowdown linked to the Middle East conflict”, said David Owen, principal economist at S&P Global Market Intelligence.
“Businesses saw customer demand improve, not just in local markets but abroad as well, with new export business rising at the strongest rate in nearly two years,” he added.
The improvement in the UAE’s business conditions was mainly driven by a “rapid monthly rise in output”, with the fastest rate of growth since February, before the outbreak of the war.
Stronger demand conditions also supported a marked increase in new orders, although the pace of expansion eased from the seven-month high posted in August.
The overall new order numbers were also supported by an increase in new business from abroad, which expanded for the third consecutive month and at the sharpest pace since November 2024, PMI data showed.
However, as the demand strengthened, companies raised their output prices at the steepest rate since May 2011, which was among the fastest since the survey began.
"While the economic picture looks more robust now, selling charges also rose markedly, suggesting that firms are taking the opportunity to boost their margins following a period of strong input cost pressures,” Mr Owen said. “With oil markets remaining volatile, and shipping routes still constrained, input costs and selling charges may remain elevated."
Dubai momentum
Non-oil private sector business activity in Dubai, one of the biggest business and tourism centres in the Middle East, also maintained a sharp growth trajectory.
The Dubai PMI posted 54.5 in September, up from 54.1 in August, signalling a “solid improvement”, as the pace of growth was fastest in 2026 so far.
The boost to Dubai’s non-oil economic activity was largely driven a "sharp and accelerated increase in output”, the fastest so far this year. New orders also rose markedly, supported by the strongest expansion in new business from abroad for two years, the PMI survey data showed.
Although employment in the emirate increased in September, the backlog of work still increased at a sharp pace. “The rate of output price inflation quickened to the fastest since January 2014 as companies passed on higher input costs to customers,” the survey found.
