Dubai: Inflation in the UAE eased to an 18-month low of 0.6 per cent year-on-year in August and prices edged down slightly from the previous month helped by a fall in housing costs, data showed Saturday.
Annual inflation in the world's No. 4 oil exporter had slowed to 1.3 per cent in July, after an inflow of new units pushed rents down and as bank lending remained slow after last year's Dubai debt restructuring.
In August, consumer prices fell 0.1 per cent month-on-month after a 0.2 decrease in the previous month, data from the National Bureau of Statistics showed.
Housing costs, at 39 per cent the largest consumer expense, fell 0.7 per cent on a monthly basis in August due to the soft property market.
Food prices in the UAE, the second largest Arab economy after Saudi Arabia, rose 0.5 per cent in August, much lower than during Ramadan last year as the country introduced price controls and subsidies.
"Both trends — decline in rents and rise in food prices — should continue for a little longer," said Giyas Gokkent, chief economist at the National Bank of Abu Dhabi.
"Inflation will remain contained in low single digits this year and even next year but there will be an upside next year," he said.
Food prices usually rise sharply during Ramadan, which ended in August. They jumped 2.7 per cent month-on-month in September 2010, when Ramadan ended at the beginning of the month.
The UAE, which has escaped the public protests that have rocked nearby Bahrain, Oman and Yemen, said in May it would fix the cost of about 400 foodstuffs and household products until the end of the year. It also called on retailers to offer discounts of up to 50 per cent during Ramadan.
UAE Economy Minister Sultan Bin Saeed Al Mansouri said in May he expected inflation between 1 and 1.5 per cent this year.
Analysts polled expected average inflation of 2.5 per cent in 2011 after 0.9 per cent last year, which was the lowest annual level since the Gulf War started in 1990.
