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Dubai inflation slows in July as rents drop

Inflation slowed from 0.5 per cent in June, the Statistics Center said on Wednesday on its website. The cost of housing, water, electricity, gas and other fuels declined an annual 1.9 per cent, the most since April.

Rasmala Investment Bank said in its latest report that Dubai’s inflation inched up 0.51 per cent in June while Abu Dhabi’s inflation accelerated to 3.4 per cent from 3.0 per cent in May.

In June 2010, Dubai’s consumer prices edged higher, rising 0.15 per cent from the previous month, boosted mainly by increasing food prices. This compared to a 0.78 per cent rise in May that reversed a six-month run of declines. In the first six month, Dubai’s inflation rate jumped to 0.64 per cent, compared to the same period of 2009, according to the Statistics Centre data.

In the first half, Dubai’s Consumer Price Index, or CPI, reached 115.36 points, compared to 114.63 in the first half of 2009.

Education, which has 4.09 per centage weight on the emirate’s CPI, fuelled the inflation and recorded the highest increase of 12.20 per cent on higher school fees, according to the data.

The heavy weight of the index — housing, water, electricity, gas and other fuels — fell by 0.51 per cent. It contributes 43.7 per cent in the CPI.

UAE Minister of Economy Sultan bin Saeed Al Mansouri said recently that inflation in the Emirates was on track to drop to one per cent in 2010 while GDP growth would top three per cent.

The global downturn slashed consumer price growth across the Gulf oil producing region from record peaks in 2008, with some countries such as the UAE and Qatar seeing months of deflation last year.

Analysts at NCB Capital, a Saudi investment company, recently warned that prospects of a surge in oil prices above $80 per barrel could fuel high inflationary trend in the GCC.

“Positive news on the oil price will push up liquidity levels and complicate further the efforts of authorities to contain inflation. A surge in oil prices and projections that they could rise further will largely benefit Gulf crude producers but they carry risks of a return of high inflation to the region,” NCB Capital said. According to NCB Capital, the Gulf region also faced the risk of continued reliance on public spending for growth.

The Washington-based Institute of International Finance pointed out in a recent report that inflation in the UAE would be at an estimated 0.8 per cent, and Saudi Arabia’s at 4.9 per cent in 2010.

issacjohn@khaleejtimes.com