AbuDhabi -- Non-oil private sector activity in the UAE continued to expand in December owing to new business orders and strengthening market conditions, even as companies felt pressure from rising prices.

The seasonally adjusted S&P Global UAE Purchasing Managers' Index stood at 54.2 in December, after hitting a nine-month high of 54.8 in November. The index was close to the long-term monthly average of 54.3, signalling a "robust improvement" in the health of the sector, the report said.

"The UAE non-oil sector concluded 2025 with a solid upturn, marking a year of robust but somewhat tempered growth in business conditions," said David Owen, senior economist at S&P Global Market Intelligence.

Companies finished the year with two of the best months of activity growth in 2025, he added. Survey data suggested that sales were rising much faster compared with its low point in August.

"Firms took encouragement from signs of increased customer spending, rising tourism, greater technology adoption and supportive government policies," Mr Owen said.

In December, more than a quarter of surveyed companies reported month-on-month increases in output, while less than 7 per cent noted reduced output.

Companies attributed growth to rising new business intake due to improving market conditions, favourable government policy, increasing customer numbers and greater demand from international markets, the report said. However, some companies also reported subdued sales owing to intensifying competition and economic uncertainty.

Cost pressures also rose last month, with survey data indicating the fastest rise in overall input prices for 15 months.

Firms highlighted an "above-average increase" in salary expenses, as well as greater costs for transport and maintenance. In turn, they raised their selling prices for the sixth month running.

The rate of employment growth was also relatively subdued at the end of the fourth quarter, the report found.

December was "characterised by an acceleration of cost pressures and leaner inventory strategies, indicating that many firms were feeling the pinch on their balance sheets", Mr Owen said.

Overall, the PMI averaged 54 over the year, which was close to its long-run average, but "still signalled the weakest annual performance since 2021", he added.

The UAE is accelerating efforts to diversify its economy away from oil and is investing in sectors such as technology, manufacturing and tourism. The country's economy is projected to have grown 5 per cent in 2025, the UAE Central Bank said in its outlook in December.

That was driven by a 4.9 per cent growth in the non-oil sector and 5.4 per cent expansion in the hydrocarbon sector due to the "faster-than-expected reversal of oil production cuts following the Opec+ quota increases", the banking regulator said.

In 2026, growth is projected to accelerate to 5.2 per cent, driven by stronger expansion in the hydrocarbon and non-oil sectors.

The PMI found that business expectations for the year remained generally positive. However, the degree of confidence was among the lowest in the past three years, it said.

While companies were optimistic about demand trends and business investment, there were some concerns that market saturation could limit growth.

Dubai PMI

Non-oil companies across Dubai also reported strong growth in the final month of 2025. The headline PMI dipped to 54.3 in December, down from 54.5 in October and November.

Output levels increased at the sharpest rate since March 2024, due to a rise in new business intakes, although the rate of sales growth lost a bit of momentum from the previous month, the report found.

Meanwhile, cost pressures were up to their highest level in a year in December, leading to a modest rise in output prices.