Dubai inflation speeds up as food and education costs jump

Small fall in housing costs offset by leap in prices of fruit and vegetables and climbing school fees.

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A small increase in Dubai's overall rate of inflation masks a marked and rapid increase in the price of basic foodstuffs and education in the emirate, the latest report from the Dubai Statistics Centre (DSC) indicates.

The cost of living had increased 0.61 per cent at the end of September, from the same point last year, but masked within that figure was a sharp decrease in housing prices and a steep upturn in food and education costs.

Philippe Dauba-Pantanacce, a senior economist at Standard Chartered, said: "Inflation in the emirate of Dubai is still very much suppressed. The main reason for that is the fact that the housing component of the index has been in deflation on the considered period."

Housing costs, which include water, electricity and gas bills, fell 0.98 per cent. Housing accounts for about half of the basket of prices from which the DSC compiles its overall inflation rates.

Shopping costs increased steadily, with food and drink, excluding alcohol and tobacco, rising 1.38 per cent. However, prices of vegetables soared 9.49 per cent, while fruits increased 6.29 per cent.

Education costs grew by 11.12 per cent during the quarter compared with the previous quarter, while communication costs fell 10.56 per cent, driven by decreases in service costs. Dubai's inflation in August was 0.59 per cent.

Mr Dauba-Pantanacce said that despite the low level of inflation, there was little danger that price trends in the emirate would reverse soon.

"We do not foresee a deflation at this point. What we think, though, is that you will see some pressures coming from imported inflation, especially the food components of the index, as commodity prices in the world continue to rise," he said. "But this phenomenon will be offset by muted-to-negative trends in the housing sector."

The high rise in the price of fruit and vegetables could be due to seasonal factors as well as high demand seen during Ramadan and Eid, said V Nandakumar, the marketing manager for Emke, which owns Lulu Hypermarkets.

"There were some issues of transportation and some export restrictions that led to some shortage of supply," he said, referring to the drought and wildfires in Russia that sparked a ban on grain exports. "That might have been the reason for very slight variations in price. We're able to absorb that [difference] and prices have been more or less stable compared with last year."

Everything was in high demand in the days leading up to Eid and Ramadan, Mr Nandakumar said. "Meat, meat products, chicken and vegetables - dates definitely go up too, but there are other things, and we see very healthy demand."

The IMF expects inflation of 2.5 per cent in the UAE next year.