Annual inflation in the UAE soared to 1.7 per cent in June as food prices hit a nine-month high, official data showed yesterday, but the housing component helped contain price pressures.

On the month, living costs rose to an eight-month high of 0.4 per cent in June, after a 0.2 per cent rise in May, data from the National Bureau of Statistics showed.

Consumer price growth in the world's third-largest oil exporter hovered close to 1 per cent for most of 2010 as the debt woes of Dubai state-owned companies depressed bank lending and the once-booming property sector remained weak.

'I would assume that inflation continues to rise, driven by food prices and the transport category,' Giyas Gokkent, chief economist at the National Bank of Abu Dhabi, was quoted as saying in our sister publication, the Gulf Daily News.

Inflation in the Opec member climbed to a three-month high of 1.4 per cent on an annual basis in May.

Food costs, which account for 14 per cent of the basket, soared by 1.4 per cent month-on-month in June, after increasing by 1.3 per cent in the previous month.

Housing prices, the largest basket item with a 39 per cent share, increased by 0.2 per cent on a monthly basis in June after declining for six consecutive months as the property sector remains weak.

Oversupply continues to hurt the country's property market with 18,000 new homes expected to hit Dubai's market by the end of the year and rents in Abu Dhabi dropping 9 per cent in the second quarter, reports showed. Transport costs were unchanged month-on-month in June. – TradeArabia News Service