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Dubai inflation gains fastest since August

Rising housing and transport costs keep pressure on prices

Dubai’s annual consumer price index (CPI) inflation rate accelerated to 3.0 per cent year on year in November, up from 2.4 per cent the previous month, data showed on Monday.

According to Emirates NBD Research, this marked the fastest pace of annual price growth since August, while on the monthly measure inflation was at 0.5 per cent, up from 0.2 per cent in October.

Over the year to date, headline annual inflation has averaged 3.3 per cent, the same pace as seen in 2023. “Next year we forecast that price growth will slow to an average 2.8 per cent year on year, with transport set to remain a drag on the headline measure but housing remaining the key driver,” Daniel Richards, senior economist at Emirates NBD, wrote in a note.

Transport inflation, which accounts for around 10 per cent of the basket, was at -4.3 per cent year on year in November, compared to -10.6 per cent in October, which goes a long way to explaining the acceleration in headline inflation last month. “Nevertheless, the annual drag is still sizeable and we expect that transport costs will continue to offset higher prices in other components of the basket through December and into next year given we forecast that Brent futures will average $73 per barrel in 2025, compared with a projected $80 per barrel this year. The price of Super 98 petrol in December is Dh2.61/litre, 4.7 per cent lower month on month and 11.8 per cent lower year on year,” Richards wrote.

Most other components of the CPI basket have remained fairly soft. Food and beverages prices gained 1.1 per cent year on year in November, down from 1.8 per cent in October and compared with a year-to-date average of 2.4 per cent. Clothing and footwear costs were down year on year, as were tobacco and communication while household durables and maintenance prices were just 0.3 per cent higher year on year. “The inflationary pressures from disrupted supply chains as shipping companies looked to avoid the Red Sea have largely dissipated now as firms have adjusted,” Richards said.

Businesses polled for the Dubai S&P Global PMI survey reported cutting their output prices for the second month in a row in November even as input prices rose at a moderately faster pace, and the need to remain competitive should support lower prices for consumers in the months ahead.

As has been the case for the past several years, the primary driver of inflation in Dubai in November was housing prices, which were up 7.2 per cent year on year, unchanged from the previous month. Housing accounts for around 40 per cent of the basket, so the average 6.7 per cent year to date has kept the headline measure more elevated than it would otherwise have been. “Annual rents were up 20.8 per cent year on year in November and housing is likely to remain the key determinant of Dubai’s inflation metric,” Richards said.