UAE residents brace for higher cost of living, cutting back on household expenses

As inflation bites into household budgets across the globe, UAE residents also feel the pinch of rising costs and may continue making cutbacks on their spending in the future, according to findings of a research.

The latest YouGov Realtime study, which explores how inflation has affected people's cost of living in the UAE as well as the areas where they have made cutbacks to their household spending along with their future spending intent, says residents are likely to make greatest reductions on eating out and buying gadgets and electronics.

Data collected online among 1,006 urban respondents in the UAE for the study shows that a majority (83 per cent) of residents believe their cost of living has gone up to some extent as compared to 12 months ago, with more than half (53 per cent) saying it has gone up a lot and for 30 per cent it has gone up a little.

In the first quarter of this year, the UAE's inflation increased 3.35 per cent amid higher prices in 11 main sectors, according to the latest data by the Federal Competitiveness and Statistics Centre (FCSC).The country's Consumer Price Index (CPI) jumped to 102.70 points in Q1-22, compared to 99.37 points in the year-ago period.

The prices of transportation, restaurants and hotels, food and soft drinks, and tobacco rose by 22 per cent, 6.87 per cent, 5.4 per cent, and 4.07 per cent, respectively.

“The main driver of inflation in Dubai in recent months has been transport costs, which were up 28.8 percent year-on-year in April, accounting for around half of headline inflation. Food prices (8.6 percent higher year-on-year) were the second biggest driver of inflation in April, followed by recreation and culture costs and restaurant and hotel prices,” says Khatija Haque, head of Research and Chief Economist at Emirates NBD.

According to the YouGov study, despite the rising costs, two in five (39 per cent) are hopeful and expect their household’s financial situation to become better in the future. Compared to this, fewer one in five anticipates their financial situations to worsen (21 per cent), and just under three in ten expect it to remain unchanged (27 per cent). Young adults between 25-34 years are most hopeful about their household’s financial condition improving in the future (44 per cent), whereas older adults aged 45+ were least likely to show this optimism (31 per cent).

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The rising cost made people take measures to cut down on spending. Eating out at F&B outlets (47 per cent) and spending on clothes and accessories (43 per cent) are the top areas where people have made cuts back in the past six months.

In fact, residents intend to continue taking measures in the future as well, with the highest proportion of UAE residents claiming to avoid eating out in the next six months (40 per cent). A slightly lower proportion than those who did so in the past six months, plan to cut back their spending on clothing in the upcoming six months (36 per cent).

While 40 per cent of residents would spend lesser on gadgets and electronics, 32 per cent will reduce spending on F&B takeaways and 27 per cent on non-essential food items. Grooming services (26 per cent), overseas holidays (25 per cent), and leisure activities (25 per cent) are also likely to take a hit in the upcoming six months. Just over a fifth may reduce their spending on gym subscriptions and fuel (22 per cent and 21 per cent), but fewer are expected to make cutbacks on streaming services (20 per cent), phone bills (17 per cent).

Compared to these, household essentials (16 per cent), staple essential food items (15 per cent), insurance (12 per cent) and broadband subscriptions (11 per cent) may see lesser reductions, probably because these categories are more necessary than luxurious.

—issacjohn@khaleejtimes.com

• Dubai