Dubai inflation dropped in January as transport costs eased amid lower oil prices

Annual inflation in the emirate stood at 4.6 per cent, down 0.6 per cent from the December level

The Dubai skyline. Annual inflation in the transport component of the emirate's CPI basket slowed to 4.6 per cent in January. Reem Mohammed / The National

Consumer prices in Dubai fell in January, bringing the annual inflation rate in the emirate down to 4.6 per cent, as the cost of transport fell as a result of lower oil prices.

Dubai’s Consumer Price Index declined by 0.6 per cent last month from 5.2 per cent in December 2022, the latest data from the Dubai Statistics centre showed.

Inflation in the emirate, the commercial and tourism centre in the Middle East, is expected to average 3.5 per cent this year, down from 4.7 per cent in 2022, Edward Bell, senior director of market economics at Emirates NBD, said in a note to investors on Tuesday.

The biggest drop in the last month’s CPI was the cost of transport, which fell by 8.7 per cent from December. Recreation, sport and culture also fell by about 6.4 per cent while tobacco prices dropped 5 per cent.

Annual inflation in the transport component of the CPI basket has slowed to 4.6 per cent in January, “from a 2022 high of 38 per cent last summer”, Mr Bell said.

Brent, the benchmark for two thirds of the world’s oil, swung wildly after Russia's war with Ukraine broke out in February last year.

Brent hit a 14-year high of close to $140 a barrel in March 2021 year and traded well above $100 a barrel before giving up gains on demand concerns towards the end of last year.

The sharp rise in oil prices inflated transport and logistics costs, stoking the food commodity price-driven inflation globally.

Brent has dropped 4 per cent since the start of this year amid slowing global economic growth to trade slightly above $80 a barrel mark.

Inflation in UAE has remained relatively low compared to the global average, as the Arab world’s second-largest economy continues to recover from the pandemic-induced slowdown.

The UAE economy is estimated to have grown by 7.6 per cent last year, the highest in 11 years, after expanding by 3.9 per cent in 2021, the UAE Central Bank said.

As is the case with its GCC peers, consumer prices in the Emirates have remained low, compared with the global average.

Inflation is projected to have reached 4.9 per cent in 2022, the Central Bank said in its Quarterly Economic Review 2022.

However, that compares with a global inflation rate of 8.8 per cent, according to the International Monetary Fund.

Housing and utilities costs in Dubai, which account for more than 40 per cent of the CPI basket, rose by 0.4 per cent from December to 4.4 per cent, according to Emirates NBD.

Food price inflation accelerated at the start of the year, rising 1.4 per cent from December, while the cost of furnishing, household equipment and maintenance jumped 6.2 per cent month on month.

“There was some relief on the services side … with recreation and culture costs declining [by] 6.4 per cent, month on month, in January and restaurant and hotel prices down [by] 1.5 per cent, month on month,” Mr Bell said.