Inflation continues to soften in Dubai

Dubai: Consumer prices in Dubai softened for a fifth consecutive month in March on the back of slowing in food, housing and communications cost increases, official data showed on Tuesday.

Analysts said lower prices increase Dubai's competitiveness in the business arena.

The Consumer Price Index (CPI) for last month stood at 115.47 compared to 11 5.61 in February and 115.86 in January, according to data collated by Dubai Statistics Centre.

On an annual basis, however, prices in the emirate continue to rise, but at a slower rate. March witnessed a 0.83 per cent rise in prices compared to the same month in 2009, with education, health and transport costs increasing the most.

"From the economic perspective, the much-awaited correction in prices will make Dubai more attractive for businesses, and I suspect we will see more new registrations this year in the SME segment," one business analyst said.

Inflation in the UAE as a whole hit a nine-year low of 1.5 per cent in 2009 from 12.3 per cent in 2008, due to a fall in the household category. The global financial crisis ended an oil- and real estate-fuelled boom in the Gulf, depressing consumer prices from record peaks set in 2008.

House prices

Dubai's overall inflation rate for 2008 stood at 10.77 per cent, and slowed to 4 per cent in 2009 as price growth in housing and food costs decelerated, the DSC said earlier this month. House prices in Dubai are forecast to soften a further 10 per cent this year, keeping inflation rates well within single-digits for 2010.

Economy Minister Sultan Bin Saeed Al Mansouri said last month that inflation in the UAE will not exceed 2 per cent in 2010.

Central Bank Governor Sultan Bin Nasser Al Suwaidi said in January the country would see a very low inflation rate for more than one year.

An increase in population will help Dubai maintain a positive inflation rate on an annual basis. The DSC has forecast that the emirate's population will grow by 7.6 per cent to reach 1.9 million people, compared to an estimated 1.77 million at the end of 2009.

Housing and energy, which account for 44 per cent of the Dubai CPI, edged 0.23 per cent lower in March compared to February, after a 0.86 per cent decrease the previous month.

Food prices, which have an 11 per cent weighting in the index, decreased by 0.67 per cent month-on-month in March after increasing 1.26 per cent in the previous month, the data showed.

On an annual basis, the March data showed that food costs increased by 0.64 per cent, clothing and footwear by 0.42 per cent, housing and power by 0.19 per cent, furnishings and household goods by 1.21 per cent, health by 2.95 per cent, transport by 2.55 per cent, recreation by 0.8 per cent, education by 12.2 per cent, restaurants and hotels by 1.88 per cent, miscellaneous goods and services by 2.65 per cent.

Communications costs on an annual basis fell by a whopping 10.54 per cent while the prices of beverages and tobacco, the only other category to witness a decline, dropped 2.77 per cent last month compared to March 2009.