Abu Dhabi consumer prices inch up in May

Consumer prices in Abu Dhabi rose moderately last month, as falling rents and house prices were offset by rising costs at the supermarket till.

The consumer price index - the gauge of inflation - rose by 0.3 per cent in May compared to a month earlier, according to data released by the Statistics Centre - Abu Dhabi yesterday. Compared to a year earlier, the index was up 0.7 per cent.

"The housing sector has been acting as a moderating influence, there has been a decline in prices in Abu Dhabi," said Giyas Gokkent, the chief economist at National Bank of Abu Dhabi.

Food prices increased 1 per cent. Food traditionally becomes more expensive before and during Ramadan. The Government recently froze the prices of key foodstuffs, a move that has not prevented an overall increase.

With food prices having slumped worldwide over the past two years, local prices are not expected to increase much further in the near future.

"Small economies tend to absorb global trends and global food price pressures are absent," said Mr Gokkent.

Apart from food, the expenditures labelled "miscellaneous goods and services" by the statistics centre also rose, and prices in the category rose 1.9 per cent.

In the first five months of the year inflation rose 0.9 per cent compared with a year earlier, the centre's figures show. Over the course of this period, the main driver of inflation was the hospitality sector, in which prices rose 7.8 per cent.

A steady stream of completed development has kept house prices in Abu Dhabi from rising, and additional housing will curb inflation for some time, analysts say.

"The pace of inflation will start to pick up as economic growth picks up. There is still considerable spare capacity, however, particularly in the real estate sector, and that will keep prices low for some time to come," said Simon Williams, the chief economist for the Middle East and North Africa at HSBC.

Economic growth could be fostered by Abu Dhabi's Department of Economic Development, which this year launched a business centre aimed at streamlining the licensing process for new companies. The centre issued a total of 1,999 new business licences in the first quarter of this year, according to revised figures released by the department yesterday.

This makes the quarter the first in a year in which the number of licences for companies and professionals rose compared with the previous quarter.

The department expects the number of applications for licences to rise by 10 per cent on the 180,000 applications submitted in 2012.

On top of new issuance, the department renewed more than 18,000 licences.

The department cancelled 730 licences in the first quarter. The cancellations applied to companies and professionals that had been inactive over the past two years, or which were no longer permitted to operate in Abu Dhabi city, said the department.

The department cracked down on 242 businesses in the first three months of this year for violations such as commercial fraud or disregarding regulations. Counterfeit goods with a market value of about Dh14 million were confiscated in the same period.