Dubai inflation cools on softer transport and food costs

Softer transport and food costs resulted in the cooling of Dubai’s consumers price index last month, data showed on Monday.

According to Emirates NBD Research, headline CPI inflation in Dubai slowed to 2.8 per cent year on year in March, down from 3.2 per cent over the previous two months and the slowest pace of annual price growth since October last year.

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Prices were 0.1 per cent lower compared with February, marking the first monthly deflation since July 2024. Inflation over the first quarter averaged 3.0 per cent year on year, which was slightly lower that Emirates NBD’s own forecast of 2.8 per cent.

Emirates NBD expects price growth to be more modest through the remainder of the year than what was seen in Q1. “Our expectation of softer headline inflation in the coming months is largely on the back of lower global oil prices, which have already come down sharply in April. This will be reflected in prices at the pump and in the transport component of the basket, which accounts for just over nine per cent of the total,” Daniel Richards, Senior Economist, Emirates NBD Research, wrote in a note.

Transport has already been a key factor in keeping headline inflation down over recent months, and in March it was down 3.3 per cent year on year, reflecting the fact that a litre of super 98 in March 2025 cost 9.9 per cent less than it did in March 2024. “In April, the same amount of petrol costs 18.4 per cent less than a year earlier, meaning the drag from transport will be even sharper in the next inflation print and through the rest of the year,” Richards wrote. Emirates NBD forecasts Brent crude to average of $68 per barrel this year, down from $80 in 2024. 

Housing impact

The key driver of upwards inflation in Dubai remains housing and utilities, the largest component of the basket at 40.7 per cent and the component which is seeing the fastest price growth. In March, it was up 7.2 per cent year on year, down moderately from the near decade-high pace of 7.4 per cent the previous month but still quite sharply inflationary. “This is reflective of ongoing price rises in the housing sector, with little change in utilities costs. While there is some suggestion of a stabilisation in the Dubai property sector, with price growth no longer accelerating, rents for apartments were still up by around 8 per cent year on year in Q1 while villas and townhouses were up by around 20 per cent,” Richards wrote.

The rest of the basket continues to see either soft price growth or outright deflation, Emirates NBD noted. The second largest component after housing is food and beverages, and prices were down 0.3 per cent year on year in March despite the holy month of Ramadan largely falling in this period. This marked the third month in a row of deflation for food prices. Restaurants and accommodation meanwhile softened to 0.3 per cent, down from 0.7 per cent year on year in February, and clothing and  footwear prices were down 2.7 per cent year on year for the second month running. Respondents to the S&P Global PMI survey for Dubai did raise their output prices in March but only marginally as the market remains highly competitive.

Somshankar Bandyopadhyay

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somshankar@khaleejtimes.com

Somshankar Bandyopadhyay is a News Editor with close to three decades of experience. Currently, he manages the business section, ensuring that the top economic and business news of the day reaches its readers.