Abu Dhabi Aug inflation shoots up, Bahrain prices muted
Abu Dhabi inflation at 20-mth high of 3.6 pct y/y in Aug.
September 21, 2010 1:32 by Reuters
Abu Dhabi’s annual inflation rate shot up to 3.6 percent in August, its highest in at least 20 months, as food costs surged, while price pressures remained more muted in fellow Gulf oil producer Bahrain, data showed on Tuesday.
Analysts, however, said the rise in inflation in Abu Dhabi was due to temporary rises in food prices during the holy month of Ramadan when people buy more food.
Consumer prices in Abu Dhabi, the oil-producing member of the United Arab Emirates, started to accelerate in December after five months of declines as the economy picked up, while in Bahrain weak credit growth has helped keep a lid on prices.
Inflation in Abu Dhabi, which accounts for 10 percent of the world’s oil reserves and more than 60 percent of the UAE economy, stood at 2.8 percent in July. It climbed to a record high of 14.9 percent in the oil-boom year of 2008.
On the month, Abu Dhabi consumer prices rose 0.8 percent in August, up from a 0.4 percent rise in the previous month, data from Abu Dhabi Statistics Centre (SCAD) showed.
“It’s clear that food is up given that during the month of Ramadan people consume more,” said Giyas Gokkent, head of research at the National Bank of Abu Dhabi.
The UAE, the world’s third-largest oil exporter, has yet to release inflation data for August.
Inflation in the UAE emirate of Dubai, which was hit last year by the global downturn and its own debt crisis, climbed to a five-month high of 0.8 percent on an annual basis in August, data showed on Monday
In Abu Dhabi, food prices, which account for 16 percent of the consumer price basket, rose 1.3 percent month-on-month in August, while communication costs surprised with a 12.6 percent jump. Housing costs, the largest item in the basket, stayed flat.
“I don’t really know the reason behind the sharp jump in the communication category,” Gokkent said. “It’s interesting because usually during the Eid holiday there are special offers and 50 percent reduction packages, that people can call their family members and friends.”
The Eid al-Fitr holiday celebrates the end of the fasting month of Ramadan, which lasted until mid-September.
In a June Reuters poll, analysts expected UAE inflation of 1.8 percent this year
Separately, Bahrain’s inflation edged up slightly to 2.4 percent on an annual basis in August, mainly on a jump in food prices, the non-OPEC country’s data showed on Tuesday.
Inflation started picking up slowly in November last year to reach 2.1 percent in July. Analysts expect it to stay well below a record high of 6.3 percent seen in July 2008 as the economy is recovering slowly with some banks facing a rise in bad loans and losses from real estate.
“I don’t expect this to be the start of a significant upward trend,” said Simon Williams, chief economist at HSBC Bank.
“Growth is still too weak to create demand side pressures, and the cost of imported goods is unlikely to strengthen much over the remainder of the year,” he said.
Food prices surged by 1.2 percent month-on-month after a 2.0 percent fall in July, the data showed. Housing prices remained unchanged for the second month in a row. Analysts polled by Reuters forecast inflation in the Gulf island kingdom at 3.0 percent this year .
(Additional reporting by Martina Fuchs)