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Dubai June inflation at 10-month high on food

Dubai, July 6, 2011

Consumer prices in Dubai rose by 0.5 percent on a monthly basis in June, the fastest pace in 10 months, fuelled by the fastest food price rises in three years, data showed on Wednesday.

Price pressures in the United Arab Emirates state have been anaemic for more than a year since its property bubble burst in 2008, triggering eventual debt restructuring at its flagship company, Dubai World.

Living costs in the trade and business hub grew 0.8 per cent on an annual basis in June, the biggest rise in two months, after a 0.4 per cent rise in May, data from Dubai Statistics Center showed.

Inflation in Dubai, which accounts for 28 per cent of the UAE economy and has one of the world's highest per capita incomes of nearly $42,000, reached a record high of 10.8 per cent in the oil-boom year of 2008.

'Food prices typically are quite volatile,' said Khatija Haque, senior economist at Emirates NBD in Dubai.

'Overall, I am not concerned about inflation in the UAE because we see from the other components in the index that there is very little inflation elsewhere. We have rental prices and housing costs still coming down, and this is going to offset increases in food to some extent,' she said.

Food costs, the second largest consumer expense with an 11 per cent weighting, shot up by 3.8 per cent month-on-month in June, the sharpest rise since June 2008, the data showed.

The rise was mainly due to a 23.3 per cent jump in fish prices and a 7.2 per cent increase in prices of vegetables, the statistics office said.

The UAE, which has not seen social unrest unlike nearby Bahrain and Oman, called on retailers to slash costs of basic commodities by up to 50 per cent during the holy month of Ramadan and plans to fix prices of around 400 foodstuffs and household products. It has also introduced bread and rice subsidies.

'Policy makers will be careful to ensure that the Ramadan inflation does not feed into the inflation basket as it did in the past,' said Shady Shaher, senior economist at Standard Chartered in Dubai.

Food usually drives inflation up during Ramadan, which begins in August, as families enjoy more elaborate evening meals after the daylight fast.

Housing prices, the biggest Dubai basket component, dipped 0.2 per cent in June, the fifth monthly fall in a row, as the market remains under pressure with thousands of new units coming up over the next few months.

The UAE, the world's No.3 oil exporter, is yet to release inflation data for June.

Analysts polled by Reuters in June expected UAE inflation to accelerate to 2.5 per cent this year from 0.9 per cent in 2010, which was the lowest annual level since the Gulf war started in 1990. – Reuters




Tags: inflation | Dubai | Food prices | June |

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