Dubai: Dubai’s consumer price inflation climbed to 3.07 per cent at the close of the third quarter of 2014 compared with 1.02 per cent at the close of the same quarter last year, according to data published by the Dubai Statistics Centre.

Housing and utility costs, which account for almost 43.7 per cent of consumer expenses, jumped 5.11 per cent year-on-year. Food and beverage prices, which account for 11 per cent of the basket, increased 3.15 per cent on an annual basis.

Other key contributors to the price surge in the emirate included cost of education which was up by 4.31 per cent, price of household maintenance up 3.03 per cent, clothing and footwear up by 2.08 per cent.

The International Monetary Fund (IMF) in its Article 4 Consultation with the UAE has projected the inflation to increase, driven by higher demand pressures on housing, food and cost of education

The IMF has forecast the UAE inflation rate at 2.2 per cent and 2.5 per cent for 2014 and 2015, respectively, and has warned that the strengthening real estate cycle, particularly in the Dubai residential market, could attract increased speculative demand leading to higher inflationary pressure.

The third quarter data shows an across the board increase in prices, with health-care prices surging 2.36 per cent, cost of education up by 4.31 per cent, restaurants and hotels prices up by 2.76 per cent and and transport 1.05 per cent, according to DSC numbers.

The last purchasing manager’s index (PMI) data for September showed that the overall input prices in the UAE are on an upswing, signalling a consistent climb in cost pressures in the non-oil private sector.

The rate of inflation eased slightly from the previous month, however, to the slowest in four months. While purchase prices rose at a slower pace, average staff costs increased at a slightly accelerated rate. While around 9 per cent of PMI survey participants signalled higher cost burdens, only 2 per cent reported a decline.

In the PMI survey, companies attributed the rise in purchase prices to increased market demand, higher raw material costs and general inflationary pressures. In addition, average salaries in the UAE’s non-oil producing private sector showed a further uptick in September. Thus economists attribute both cost push and demand pull factors at work behind the rising prices.

Although the overall inflation outlook for Dubai is pointing towards further moderate rise, economists believe the surge is unlikely to be very sharp due macro prudential measures taken by the Government and the central bank to curb a speculative surge in real estate prices.

“Sharp increases in residential sales prices from late 2012 to March 2014 raised concerns that another real estate bubble could be emerging. However, real estate prices have eased in recent months, as the authorities sought to cool the market,” said Garbis Iradian, Deputy Director Africa and Middle East Department of Institute of International Finance.

In Dubai and Abu Dhabi, the annual real estate price increase slowed to around 15 per cent, year-on-year, in September 2014 from 35 per cent in March 2014. The authorities have taken measures to contain rising risks in the real estate market, including through tighter requirements on mortgage lending, increasing land supply, and the imposition of higher transaction taxes. “Nonetheless, policy-makers need to be vigilant, and ready to tighten macro-prudential policy further down the road to minimise the risk of another boom-bust cycle,” said Iradian.