UAE inflation hits 4.32% in May on high housing rents

The rise in Consumer Price Index comes from different expenditure groups chiefly the food and beverages group that rose 1.42 per cent year-on-year basis in the month.



By Haseeb Haider

Published: Tue 23 Jun 2015, 11:58 PM

Last updated: Wed 8 Jul 2015, 3:18 PM

The inflation report showed that consumer prices rose by 0.65 per cent in Dubai; followed by 0.35 per cent in Fujairah and Abu Dhabi by 0.19 per cent. - KT file photo
The inflation report showed that consumer prices rose by 0.65 per cent in Dubai; followed by 0.35 per cent in Fujairah and Abu Dhabi by 0.19 per cent. - KT file photo

Abu Dhabi: The year-on-year prices of consumer goods climbed 4.32 per cent in May due to higher housing rents and rising food prices in the UAE.

The overall Consumer Price Index reached 125.27 points last month while it rose 0.27 per cent in a month-to-month comparison, according to the National Bureau of Statistics.

The rise in Consumer Price Index comes from different expenditure groups chiefly the food and beverages group that rose 1.42 per cent year-on-year basis in the month. Other expenditure groups that contributed to the rise in CPI included the increase in restaurant and hotels group that contributed 0.48 per cent; housing 0.22 per cent; miscellaneous goods and services 0.16 per cent.

In a research note on Monday, Dr Paul Wetterwald, chief economist at Credit Agricole Private Banking, said: “Interestingly in the UAE, once again new orders and new export orders components reflected strong growth, while job creation hit a three-month high. This is reflected in the UAE’s non-oil private sector PMI which did not decline significantly in May (56.4) compared to 56.8 in April.”

On the other hand, input costs rose contrasting with a slight decline of the output prices charged by companies, he said.

In this background, Dr Paul said it is too early to infer from this latest change that a downward trend in the CPI indices has started.

“We can see that the UAE’s CPI was up 4.2 per cent year-on-year basis in April, which is the same as in Dubai where inflation can be an issue,” he said.

“We can say that the UAE is yet to fully feel the pinch of the lower oil price across its relatively diversified economy in comparison to GCC peers,” he added.

The International Monetary Fund (IMF), which recently concluded consultations with the UAE under Article IV, said the outlook for economic activity in the emirate is expected to moderate with non-hydrocarbon growth projected at 3.4 per cent in 2015 amid lower oil prices and an appreciation of the real effective exchange rate.

“Sales prices in the real estate market have stabilised, but increases in rents more than offset the dampening effect of US dollar appreciation on imported prices, pushing up inflation, which is expected to reach 3.8 per cent on average in 2015,” the fund said.

The inflation report also showed that in the month, consumer prices rose by 0.65 per cent in Dubai; followed by 0.35 per cent in Fujairah and Abu Dhabi by 0.19 per cent.

In January, Abu Dhabi revised the electricity and water charges, which had its impact on inflation.

The UAE National Bureau of Statistics data for May says that major contributing factor to the rise of inflation was housing which rose 9.38 per cent; followed by education, restaurant and hotels and beverage and tobacco groups that contributed 3 per cent each in May.

haseeb@khaleejtimes.com


More news from Local Business