Inflation climbs to 4.43% in UAE

The overall inflation in the country rose to 4.43 per cent year-on-year in July, highest in six years. In a month-on-month comparison, CPI rose to 126.03 points from 125.66 points or 0.37 points.

The chief contributing factors to the rise in inflation were led by food and beverages that rose 1.37 per cent; followed by textiles, clothing and footwear that went up 0.33 per cent and rise of 0.13 per cent in housing rents.

Decreases to the CPI came from miscellaneous goods and services 0.12 per cent; medical care 0.07 per cent and furniture and household goods 0.01 per cent.

Housing and utility costs, which account for over 39 per cent of consumer expenses, jumped 10.0 per cent from a year earlier in July and rose 0.1 per cent from the previous month. Abu Dhabi hiked electricity and water tariffs from January 1. Food and soft drink prices, which account for nearly 14 per cent of the basket, rose 3.4 per cent year-on-year and 1.4 per cent month-on-month.

At the emirate level, CPI fluctuated highest in Sharjah measuring 0.54 per cent; followed by Ajman where 0.49 per cent growth was witnessed. In Dubai, it rose 0.45 per cent followed by 0.31 per cent in Abu Dhabi, according to latest data. Lowest fluctuation of 0.15 per cent was noted in Fujairah, according to the National Bureau of Statistics.

On the rise in food prices in July which is reflected on the CPI, a leading retailer Wissal Ahmed Khan, chief executive officer of Alam Supermarkets in Abu Dhabi, said: "The period covered in the survey includes the second half of Holy month of Ramadan, when the promotions launched by the retailers came to an end, to normal price levels."

He said that retailers had offered hundreds of food items on little or no profit basis during the first half of Ramadan, which is a standard practice and towards the end of the holy month, the prices are reverted to their original levels.

Carla Slim, economist Mena, Standard Chartered Bank, said: "Inflation is on the rise in the UAE." Inflation in Abu Dhabi is at a six-year high, driven by housing costs and the cost of water, electricity, gas and other fuels, she said. International Monetary Fund concluded consultations under article IV on July 29 and in its assessment it said, the economic outlook is expected to moderate amid lower oil prices in the year.

Annual inflation is projected to pick up to 3.8 per cent in 2015 against 2.3 per cent in 2014. In her analysis on the rise in inflation, Dr Monica Malik, chief economist at Abu Dhabi Commercial Bank said the rise in clothing and food prices in July were driven by seasonal factors with the Eid holidays."

Given the strong USD and weak global inflation, "We believe that these drivers will likely moderate in the up-coming months.

"However, inflation is expected to accelerate in August with the increases in gasoline prices. We estimate that the fuel price change in August could add one percentage point to headline inflation," Dr Monica said.
Source: Khaleej Times