UAE inflation rate remains stable

Inflation in the UAE remained stable at 0.9 per cent year-on-year in July, but prices booked their highest monthly rise in eight months due to more expensive fuel, data showed on Tuesday.

The world's third largest oil exporter saw months of deflation last year, after inflation hit a record double-digit peak in 2008. Price pressures are expected to stay benign this year.

In July, consumer prices rose 0.3 per cent month-on-month after edging up 0.1 per cent in the previous month, data from the National Bureau of Statistics showed.

"Food and rent categories have been the driving elements over a longer-term perspective," said Giyas Gokkent, head of research at National Bank of Abu Dhabi.

"However, for the month of July, the local gasoline price hikes and the impact of this on the transportation category were clearly the key factor affecting inflation, while rent and food categories actually saw declines," he said.

Transport costs, the third largest basket component with a 10 percent weight, soared 3.5 percent on the month in July, the fastest rise this year, up from 0.3 percent growth in June.

The housing and energy item, which accounts for 39 per cent of the basket, registered a 0.2 percent fall, mainly due to continued decline in rents, following the same rise in June.

Food prices were flat in July, ahead of the month of Ramadan when prices usually rise, after a 0.1 percent increase in the previous month.

"We expect the overall inflation environment to remain very weak," said Monica Malik, chief economist at EFG Hermes in Dubai. "We expect to see an increase in food prices going forward," she said.

Annual inflation slowed in Abu Dhabi and Dubai to 2.8 per cent and 0.4 per cent, respectively, in July, data showed last week. The data for the UAE and the individual emirates are not directly comparable as basket weightings differ.

In a Reuters poll released in June, analysts expected UAE inflation of 1.8 per cent this year and gross domestic product growth of 2.1 per cent, the slowest rate in the Gulf.

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