Dubai deflation eases to 1.2%

Deflation in Dubai eased to its lowest annual rate in four months in May, data showed, dipping to 1.2 per cent to extend the emirate’s longest period of price declines since inflation hit a record 10.8 per cent in 2008. Month on month prices rose 0.3 per cent, driven by higher food costs, ending a series of five monthly falls in the trade and business hub, Thursday’s Dubai Statistics Centre data showed. Annual price falls eased to 1.5 per cent in April from 1.9 per cent in March. Deflation is being mainly driven by a weak housing market, which has yet to recover from a property decline in late 2008, though the UAE uses price controls to keep some food costs low.   The property market remains oversupplied with new residential units following a $25 billion debt restructuring of a state-owned conglomerate in 2009-2010. Strong trade flows and tourist numbers helped Dubai’s economy, expand 3.4 per cent in 2011. “(It is) another benign monthly inflation figure driven by a rise in food prices,” Giyas Gokkent, chief economist at National Bank of Abu Dhabi, said in a note. “Dubai continues to experience deflation in the annual headline figures due to a decline in rents.”  Costs of housing including rents and utilities dipped 0.1 per cent month-on-month.