Dubai inflation hits its highest level in years

The overall cost of goods and services in Dubai jumped to its highest level this year, with the annual inflation reaching 4.68 per cent in May.

The latest data released by the Dubai Statistics Centre showed that last month's inflation, driven primarily by housing and utility prices, is the highest since May 2009, when inflation was at 4.67 per cent.

Analysts, however, said the increase is only temporary and most probably driven by Ramadan, when retailers tend to mark up grocery prices.

Inflation is still expected to decline this year, with the rents in some areas in Dubai, as well as property values, already starting to fall. Other contributing factors will be the slowdown in monetary aggregate growth and strengthening of the US dollar.

"After the artificial price increase during Ramadan, inflation is in a declining trend. The downtrend, which is expected to continue in the next few months, can be attributed to the appreciation of the US dollar against other currencies, the decline in oil prices and softening of property sales prices," Alp Eke, director and senior economist at the National Bank of Abu Dhabi (NBAD), told Gulf News on Monday.

According to the latest inflation report, the cost of housing, water, electricity, gas and other fuels, which make up 43.7 per cent of household expenses, registered an increase of 7.8 per cent in May compared to a year earlier, while rising by 0.7 per cent from April 2015.

The steepest annual increase, however, is in the cost of clothing and footwear, at 8.67 per cent, although this expenditure group constitutes only 5.52 per cent of household expenses.

The cost of food and beverages, which make up 11 per cent of the expenditure, rose by 1.67 per cent, while transportation, which constitutes 9 per cent of the expenses, increased by 1.21 per cent.

Dubai's month-on-month inflation registered a marginal increase, at 0.49 per cent from 4.19 per cent in April.

The National Statistics Centre also announced that the annual inflation for the emirates rose by 4.32 per cent last Month, driven primarily by housing, which registered a 9.38 per cent inflation.

Eke said that the main driver of Dubai's latest domestic inflation is housing, but with lower oil prices, foreign-origin inflation is likely to fall.

"If you look at [the data], you will see that the imported components are declining and only the domestic component, which is rent, is left. Rent is by far the main driver, but we can see that rent is also declining. Rents have been slowing down in recent months," he said.