Non-oil private sector activity improved across the UAE, Saudi Arabia, Kuwait and Egypt in May, according to S&P Global Purchasing Managers’ Index (PMI) data released on Wednesday. The gains came despite continuing regional challenges that have affected business sentiment and economic activity across the Middle East.

The UAE recorded a rise in its non-oil PMI from 52.1 in April to 52.6 in May, reaching its highest level in three months. The increase followed two consecutive months of decline and reflected stronger business conditions. Around 21% of surveyed firms reported higher activity levels, citing improved market demand, expanding projects and support from government initiatives.

However, employment growth in the UAE slowed to its weakest pace since October last year. Businesses pointed to softer demand growth, higher input costs and increased automation as reasons for limiting new hiring. Commenting on the results, David Owen, Principal Economist at S&P Global Market Intelligence, said: “Positively, the longer-term outlook remained strong in May, suggesting that businesses still view these current challenges as temporary and expect growth to bounce back quickly.”

Dubai also posted a modest improvement, with its PMI rising to 52.0 in May from 51.6 in April. The earlier reading had been the emirate’s lowest in 55 months. The latest figures indicate a gradual strengthening of Dubai’s non-oil private sector.

Saudi Arabia’s non-oil economy continued to recover, with the PMI climbing from 51.5 in April to 52.8 in May. Business activity expanded at the fastest pace in three months as firms benefited from a return to more normal operating conditions after earlier disruptions linked to regional tensions. Naif Al-Ghaith, Chief Economist at Riyad Bank, said the latest data supports expectations that Saudi Arabia’s non-oil economy will maintain its positive momentum throughout the rest of 2026.

In Egypt, the PMI improved from 46.6 in April to 47.1 in May. Although the reading remained below the 50-point threshold that separates growth from contraction, it signaled a slower pace of decline in business activity. The sector has now remained in contraction for five consecutive months.

Egyptian businesses continued to face significant cost pressures. Input prices rose at the fastest rate since January 2023, driven by higher fuel expenses, increased diesel and electricity costs, currency weakness and wage-related pressures. Despite these challenges, firms expressed greater confidence about future business conditions. Owen noted that companies remain hopeful about the outlook even as they navigate current economic difficulties.

Kuwait also recorded an improvement, with its PMI rising from 46.3 in April to 47.2 in May, the highest level in three months. While the reading continued to indicate contraction, the pace of decline eased compared with previous months. Business activity was affected by the closure of the border with Iraq and the impact of regional conflict, while competitive pressures weighed on new orders and output.

Analysts believe conditions in Kuwait may improve further in the coming months. Andrew Harker, Economics Director at S&P Global Market Intelligence, said weaker rates of decline in output and new orders, combined with stronger business confidence, suggest that the country’s non-oil private sector could return to growth territory in the near future.

The latest PMI data highlights the resilience of businesses across the region. While geopolitical tensions, cost pressures and weaker demand continue to create challenges, the improving readings in May point to cautious optimism and expectations of stronger economic activity in the months ahead.