Transportation costs increase as housing and clothing prices fall

Dubai: The consumer prices rise in the UAE stood at 0.86 per cent on an annual basis in July, data from the National Bureau of Statistics showed yesterday.

The overall Consumer Price Index (CPI) reached 114.46 in July 2010 compared to the base year (2007=100). It increased by 0.29 per cent compared to its value at the end of June 2010, and by 0.86 per cent compared to its value at the end of July 2009, the authority said.

At the same time, it increased by 0.49 per cent for the first-seven months of 2010 compared to its value at the end of the first-seven month of 2009.

Among the major expenditure groups on a monthly basis, transportation prices rose by 3.47 per cent, goods and services by 1.28 per cent. Textiles and clothing prices decreased by 1.19 per cent, housing went lower by 0.20 per cent.

Year-over-year, the biggest price rise took place in the education sector, which rose by 10.57 per cent, followed by transportation costs (+4.52 per cent) and food and beverages (+3.66). Communications costs went lower by 6.19 per cent, clothing and footwear shed 5.07 per cent, and housing 0.07 per cent.

The CPI fluctuated considerably in the various emirates, the Bureau of Statistics said. Abu Dhabi's inflation was 0.40 per cent, Dubai's only 0.05 per cent. Sharjah, Umm Al Quwain and Ras Al Khaimah were only slightly up, while Ajman's prices rose by 1.88 per cent and Fujairah's declined by 0.42 per cent.

Analysts expected prices to pick up again this year as the country recovers from last year's slowdown. UAE inflation hit a nine-year low of 1.6 per cent last year, after a record high of 12.3 per cent in 2008.

The UAE is seen expanding by 2.1 per cent this year following an estimated 1.4 per cent contraction in 2009.

"We expect the overall inflation environment to remain very weak," said Monica Malek, Chief Economist at EFH Hermes in Dubai. "We have expected to see an increase in transportation costs with the reduction in fuel subsidies in July and the subsequent increase in gasoline prices at the pump."

Giyas Gokkent, Head of Research, National Bank of Abu Dhabi, said that he expects the general trend of inflation to be in the low single digits in the medium term. "In 2009, we had a rapid decline in price pressures so in 2010 there is a slight bounce on a year-on-year basis," he said. "The inflation rate is higher in Abu Dhabi with a more rapid pace of economic development at present. Over the next two years or so inflation may settle at around 2 to 3 per cent in the UAE."

Inflation Rates

— With inputs from Reuters