Utilities fall as inflation steadies

Dubai’s inflation rate edged up a mere 0.34 per cent in the month of September thanks to a drop in the two sub-groups of ‘housing, water, electricity, gas and other fuels’ and ‘transport’, which witnessed a month-on-month decline of 0.14 per cent and 0.48 per cent, respectively, according to data published by the Dubai Statistics Centre (DSC).

The former subgroup of housing has a major 43.7 per cent weightage in the Consumer Price Index (CPI), which is used to compute overall inflation in Dubai, and even a small reduction in this particular sub-group has a stabilising effect on overall inflation figures. Transport too has a reasonably significant weightage (9.08 per cent) in the CPI.

Housing costs have been on a steady decline in Dubai over the past 18 months, with rents, which used to form a big proportion of household expenditures, slashing by almost half in certain areas of the emirate.

On the other hand, Education, which has a 4.09 per cent weightage in CPI, went up by 3.41 per cent in September after staying stable for the past nine months, DSC data shows.

Another area of concern is ‘Food and non-alcoholic beverages’, which rose 1.78 per cent month-on-month in September and has an 11.08 per cent weightage in CPI.

Globally soaring food prices are to blame for the rise in cost of food items in Dubai, say analysts, who do not rule out further price increases in the wake of rising international commodity prices.

Communication costs are the only ones among the CPI table that are currently below the 2007 (base year) averages, with communication index currently at 90.82 (2007 = 100), implying an almost 10 per cent reduction in the cost of communication in the emirate.

That could be explained by the entry of Du, the second telecom operator in the country, which entered the country’s mobile market space in 2007 and has since been providing services across the whole spectrum, including fixed line, internet and satellite television domains.

In fact, incumbent Etisalat’s monopoly in providing fixed-line, Internet and cable TV services in certain areas of the emirate stands to soon become a thing of the past as both operators are entering into each other’s previously exclusive parts of Dubai.

Dubai’s CPI for September 2010 is at 116.63 (2007 = 100), according to DSC data, up marginally from 116.23 in the previous month. The emirate’s average CPI for 2010 so far stands at 115.62, compared with 115.23 average CPI for 2009.

Dubai’s monthly inflation rate turned positive in the month of May this year, after six consecutive months of negative inflation, DSC data shows.