DUBAI: Most companies are opting to maintain existing workforce levels, with subdued demand growth and global market shifts prompting a cautious approach.

The latest Purchasing Managers Index (PMI) for the UAE dipped to 54, down from 55 in February. While still signaling expansion—any score above 50 indicates growth—the figure marks the lowest reading since September 2023, as businesses grapple with softer demand and operational challenges.

In a bid to retain profit margins, several businesses raised prices at the second-fastest pace in over seven years, even as input cost pressures eased. Firms appear increasingly focused on cost control rather than workforce expansion.

March also saw a steep rise in backlogs, with many companies reporting delays in client payments and input deliveries. These factors continue to strain operational efficiency, despite marginal improvements in vendor performance.

The slowdown coincides with global market recalibrations, including the new 10% U.S. tariffs, which are expected to impact business sentiment and activity in the UAE and wider Gulf in the coming months.

To address payment delays, the UAE is pushing forward with a mandatory e-invoicing system, aiming to streamline transactions and reduce backlogs.

Still, with new order growth softening for a third consecutive month, some firms may face increased difficulty in hitting sales targets—a challenge likely to persist if hiring and investment remain subdued.