The UAE Purchasing Managers’ Index rose from 54.6 in April to a five month high at 55.6 in May, according to S&P Global.
The overall headline index performance was in line with the rate of growth in output, the highest in 2022 so far.
Besides an increase in domestic demand, firms attributed the growth in output to increased marketing and renewed price discounting, which helped lift sales amid reports of tightened price competition.
Demand from foreign customers also expanded, albeit at a softer rate compared to April.
There was a sharper increase in new work as client demand continued to strengthen, according to S&P Global.
The main headwind to the non-oil sector in May was inflation.
“Companies are choosing to absorb extra costs, rather than pass them onto customers, but this is unlikely to continue indefinitely,” David Owen, an economist at S&P Global, pointed out.
Despite enhanced economic conditions, stocks of purchases recorded only a marginal increase in May.
The input price inflation was the strongest in three and a half years, pushing some of the firms to absorb costs instead of passing them on to the customers amid strong price competition.
Vendor performance improved in May, and the firms surveyed often found that suppliers were able to deliver more quickly when requested.
Businesses were struggling to keep up with demand, as backlogs of work rose at the sharpest rate for eight months.
Strengthening demand led to the fastest rate of job creation seen for seven months.