Abu Dhabi inflation last month edged down to 4.9 per cent after hitting a six-year peak of 5.2 per cent in May, even as housing costs continued to rise.
The stronger US dollar has been pushing down the price of imports, while checks on food prices during Ramadan are likely to have also helped trim inflation, said Monica Malik, the chief economist at Abu Dhabi Commercial Bank.
The quieter summer period might also attenuate rental price inflation in Abu Dhabi, Ms Malik said.
Food prices fell further as the cost of agricultural commodities hit a new five-year low, according to data from the United Nations Food and Agriculture Organization.
But prices continue to rise year-on-year as housing costs and the end of subsidies for expatriates on electricity and water, enacted from January 1, push up living costs for consumers.
Rents in Abu Dhabi rose by 12 per cent last year after the removal of the cap on rents, according to the real estate consultancy CBRE.
Retailers tend to raise charges in advance of the holy month, during which many prices are frozen. Special restaurant deals on iftar also end up increasing the average price of dining out.
Alp Eke, the senior economist at National Bank of Abu Dhabi, expects inflation to slide further after the end of Ramadan as hikes in US interest rates further increase the purchasing power of the dollar-pegged dirham.
Prices in Abu Dhabi are rising faster than in Dubai, where inflation stands at 4.6 per cent.
But there are signs that Dubai’s housing market is cooling because of mortgage lending limits and increased transaction taxes.
The ratings agency Standard and Poor’s expects house prices in Dubai to fall by as much as 20 per cent over the course of the year.
Abu Dhabi is the 33rd-most expensive city in which to live in the world, according to a survey from the consultancy Mercer. The capital ranked 78th last year. Dubai is the world’s 23rd-most expensive city; last year it was ranked 67th.
abouyamourn@thenational.ae
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