UAE Inflation rise for the first time in 5 months

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As per National Bureau of Statistics, inflation in the UAE rose to 1.39% in May on rising food prices. Living costs rose 0.6 per cent in May after five monthly declines in a row.

Inflation was 1.1% in April this year while it was 0.9% in May last year. Consumer Price Index (CPI) growth remained around 1% in the country for most of 2010.

Inflation in the country slowed to 1.6% in 2009, compared with 12.3% in 2008, the UAE government said in its annual economic report last year.

Food and Beverage costs, which account for 14% of consumer expenses in the $298 billion UAE economy, jumped 1.3% month-on-month in May, the same pace as in the previous month, the data showed. Analysts polled by Reuters in March expected average inflation in the second largest Arab economy to quicken to 2.5% in 2011 from 0.9% last year, which was the lowest annual level since 1990.

Last month the UAE Ministry of Economy launched a nationwide campaign to stabilize the prices of 400 major commodities at 70 retail outlets. Retail outlets have responded to the ministry?s request and agreed to fix the prices of 400 major commodities at 70 outlets in various emirates until the end of 2011, according to a ministry?s top official. These outlets include Carrefour, cooperative societies, Lulu Hypermarket and Spinneys, which form 75% of the market share of retail outlets in the UAE, he added.

Housing prices, the largest basket item with a 39% share, fell 0.1% on a monthly basis in May in a sixth consecutive decline as the property sector remains weak. Transport costs rose 0.1 per cent, slightly slower than in April.? In March, the UAE?s central bank governor said inflation was not a worry, adding that consumer price growth should range around very low single-digit rates.

Dr Mohammad Amerah, an Abu Dhabi-based economist told Gulf News said, “It seems that in May, the prices rose as a result of an increase in consumer demand. This is normal as during this time of the year, people prepare to go for their summer vacation and do most of their shopping. This puts pressure on the prices of consumer goods”.

The National Bank of Kuwait, in a recent report on the UAE, said as long as food price inflation continues to decelerate, inflation is likely to remain very low this year, averaging 2%. ?Faster economic growth and the effect of the weak US dollar on import prices could see inflation accelerate next year. But at 3%, it will remain amongst the lowest in the GCC,? the bank said.

Sources: Reuters, Gulf News, Khaleej times

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