Higher rents and utility prices push up UAE inflation

Increases in the prices of alcohol, education and clothes pushed overall consumer prices higher across the UAE last month, according to the latest inflation data released yesterday.

Prices increased 1.3 per cent year-on-year last month, the National Bureau of Statistics report said.

Housing and utilities prices, which account for 39 per cent of the UAE’s inflation basket, gained 1.2 per cent year-on-year and 0.1 per cent from last month.

Housing costs in Abu Dhabi rose 0.6 per cent year on year in October, according to data released yesterday by Statistics Centre-Abu Dhabi (Scad).

The capital’s inflation rate last month rose 1.6 per cent year on year, led by an increase in the prices of beverages, tobacco, education and clothing.

But gains in housing prices and rentals this year were still not reflected in the capital’s official data.

“Inflation continues to remain low overall, with the rise in rental prices not yet fully filtering into the inflation data,” said Monica Malik, the chief economist of private bank EFG-Hermes.

“Moreover, a strong dollar and weak global inflation are helping keep imported inflation down despite the strong domestic demand environment.”

Indeed, Abu Dhabi’s inflation rate last month dropped 0.2 per cent from September, Scad said. The UAE’s national inflation rate decreased 0.1 per cent month on month, according to the bureau.

Alcohol and tobacco prices gained 8.5 per cent last month from the same period last year, while education prices rose 3.9 per cent while clothing and footwear prices increased 3.8 per cent, Scad said.

Food and non-alcoholic beverage prices climbed 3 per cent, it said.

Inflation has remained relatively weak since the global financial crisis tightened the availability of credit and weakened the property market. But house prices have rebounded sharply this year as confidence returns to the market and stalled projects restart.

The rental rates for mid-range villas and apartments have accelerated by 20 to 30 per cent in the first nine months of the year compared to the year-earlier ­period.

Elsewhere, UAE food and soft-drink prices, which account for nearly 14 per cent of the inflation basket, rose 1.9 per cent on an annual basis in October but fell 0.7 per cent from September, the bureau said. In Abu Dhabi, restaurant and hotel prices rose 2.4 per cent while recreation and cultural entertainment prices fell 0.7 per cent, according to Scad.

According to a Reuters poll of analysts in September, the UAE was forecasted to have an average inflation growth of 1.5 per cent this year and 2.3 per cent next year, up from the 0.7 per cent clip in 2012, which was the lowest level of inflation since 1990.

mkassem@thenational.ae