Inflation up even as food costs fall

Dubai inflation edged up to 0.4 per cent on an annual basis in January, but living costs in the Gulf Arab emirate fell slightly from the previous month due to a drop in food prices, data showed on Monday.

Annual inflation in the United Arab Emirates member hovered  below 1 per cent for most of 2010 as lending and the property sector remained weak following debt problems experienced by some Dubai state-owned companies, although trade has picked up strongly.

Inflation was 0.3 per cent in December, putting the full year figure at 0.6 per cent after 4.0 per cent in 2009.

Inflation eased to 0.5 per cent in January.

"The last time inflation was so low was more than a decade or two (ago)," said Giyas Gokkent, chief economist at the National Bank of Abu Dhabi.
"The overall outlook is for continued low single-digit inflation, but potentially with a reversal of the decline in the annual figures in the coming months," he said.

On the month, consumer prices in Dubai, the region's trade hub, decreased by 0.1 per cent in January, after a 0.3 per cent fall in the previous month, data from the Dubai Statistics Center showed.

Inflation in the UAE, the world's third largest crude exporter, eased to 1.6 per cent in January, data showed last month, helped by an unexpected drop in food prices.

Real estate costs, the largest consumer expense in Dubai at nearly 44 per cent, rose 0.1 percent month-on-month in January after staying flat in the previous month and analysts expected continued supply of new housing to keep rents in check.

Food prices in Dubai plunged 1.6 per cent in January, the second monthly drop in a row.

Transport costs rose by 0.3 per cent month-on-month.

In December, a Reuters poll showed analysts forecasting annual inflation in the UAE, the second largest Arab economy, at 2.8 per cent this year.
 

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