Sun, Dec 22, 2024 | Jumada al-Aakhirah 21, 1446 | DXB ktweather icon0°C

Dubai inflation eases to 14-month low

Easing oil prices helps lower transport costs in emirate

Published: Mon 18 Nov 2024, 8:03 PM

Top Stories

Traffic along Mohamed bin Zayed Road. Transport prices were down 10.6 per cent year on year, following the eight per cent registered in September. A major driver of this has been the fall in global oil prices which are reflected in prices at the pump. — File photo

Traffic along Mohamed bin Zayed Road. Transport prices were down 10.6 per cent year on year, following the eight per cent registered in September. A major driver of this has been the fall in global oil prices which are reflected in prices at the pump. — File photo

Dubai’s inflation is likely to continue slowing over the rest of this year and the next as price rises eased to a more than 14-month low last month, experts said.

Dubai’s headline CPI inflation slowed to 2.4 per cent year on year in October, from 2.5 per cent in September. This was the slowest pace of annual pace growth since August 2023, according to Emirates NBD Research. Prices were 0.2 per cent higher in October than the previous month, compared with a flat monthly print in September. Over the year to date, annual inflation has averaged 3.3 per cent year on year.

“We have made a modest downward adjustment to our full-year forecasts for 2024 and 2025 as the drags on inflation over the past several months are likely to persist through the remainder of this year and into the next. We now project an annual average of 3.3 per cent and 2.8 per cent respectively, compared with 3.5 per cent and 3.0 per cent previously. Easing inflation should be supportive of greater spending by households and businesses, thereby boosting real GDP growth,” senior economist Daniel Richards said in a note.

A notable drag on price growth over the past couple of months has been the transport component of the basket, which accounts for nearly 10 per cent of the total. In October, transport prices were down 10.6 per cent year on year, following the eight per cent registered in September. A major driver of this has been the fall in global oil prices which are reflected in prices at the pump, which account for a substantial share of the transport component. In October, the price of a litre of Super 98 petrol was Dh2.66, down 22.7 per cent year on year, following a 15.2 per cent year on year decline in September.

There has been a notable slowdown in other components of the basket this year also as some of the spike in global prices seen in 2022 and 2023 has passed through the base and worldwide disruptions have eased. Household durables and maintenance prices were up just 0.5 per cent year on year in October and have averaged 0.5 per cent year to date, compared with 8.3 per cent over the corresponding period last year. Similarly, food and beverages prices were up 1.8 per cent year on year in October and have averaged 2.6 per cent year to date, compared with an average 4.6 per cent over January to October last year.

As has been the case through the rest of the year, the primary force behind inflation in Dubai in October was the housing component, with prices up 0.7 per cent month on month for the third month running and 7.2 per cent year on year. This was a modest acceleration on the seven per cent in September and marks the fastest pace of inflation in housing in Dubai since mid2015 as the index is increasingly reflecting capital and rental costs over the past several years. In October, capital values for apartments were on average 19.8 per cent higher year on year while average villa prices were up by 20.24 per cent year on year across the city. Rental prices across villas and apartments meanwhile were up 17.3 per cent year on year. “The pace of growth will likely slow eventually but for now housing will continue to underpin headline inflation in Dubai,” Richards said.

Looking ahead to the November inflation print, the drag from transport has likely softened as petrol prices rose month on month for the first time since August. Nevertheless, they remain 9.6 per cent lower than the previous year, so the annual decline will still be sizeable, Emirates NBD says. “Next year we forecast that Brent futures will average $73 per barrel, compared with a projected $80 per barrel in 2024, meaning that transport will likely continue to exert downward pressure on inflation in 2025,” Richards said.



Next Story