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UAE’s June YoY inflation at 6-month high for food

Inflation at 1.7 percent year-on-year in June versus 1.4 percent year-on-year in May; Consumer prices +0.4 percent month-on-month versus 0.2 percent month-on-month in May; Food costs rise to 9-month high - Reuters

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July 20, 2011 9:54 by



Annual inflation in the United Arab Emirates soared to 1.7 percent in June as food prices hit a nine-month high, official data showed on Tuesday, but the housing component helped contain price pressures.On the month, living costs rose to an eight-month high of 0.4 percent in June, after a 0.2 percent rise in May, data from the National Bureau of Statistics showed.

Consumer price growth in the world’s third-largest oil exporter hovered close to 1 percent for most of 2010 as the debt woes of Dubai state-owned companies depressed bank lending and the once-booming property sector remained weak.

“I would assume that inflation continues to rise, driven by food prices and the transport category,” said Giyas Gokkent, chief economist at the National Bank of Abu Dhabi.

Inflation in the OPEC member climbed to a three-month high of 1.4 percent on an annual basis in May.

Food costs, which account for 14 percent of the basket, soared by 1.4 percent month-on-month in June, after increasing by 1.3 percent in the previous month.

The UAE has escaped the public protests that have rocked autocratic regimes in nearby Bahrain, Oman and Yemen. It has however pledged to spend $1.6 billion in its less-developed northern emirates, introduced bread and rice subsidies and hiked military pensions, among other measures.

It has also called on retailers to offer discounts of up to 50 percent in the Muslim holy month of Ramadan, which begins in August, when food prices usually surge as families enjoy more elaborate evening meals after the daylight fasting.

Housing prices, the largest basket item with a 39 percent share, increased by 0.2 percent on a monthly basis in June after declining for six consecutive months as the property sector remains weak.

“The rent factor is acting as a moderating element in the CPI because of additional supply coming on stream both in Dubai and Abu Dhabi,” Gokkent said.

Oversupply continues to hurt the country’s property market with 18,000 new homes expected to hit Dubai’s market by the end of the year and rents in Abu Dhabi dropping 9 percent in the second quarter, reports showed.

Transport costs were unchanged month-on-month in June after edging up 0.1 percent in May.

Analysts polled by Reuters in June expect average inflation in the UAE to reach 2.5 percent in 2011.

In March, the Gulf country’s central bank governor said inflation was not a worry, adding that consumer price growth should range around very low single-digit rates. (Reporting by Martina Fuchs)



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