Stronger dirham lowers UAE inflation rate in February

Clothing and footwear costs fell by 0.6 percentage points month-on-month, and 1.55 percentage points annually. Pawan Singh / The National

Countrywide inflation fell to 3.61 per cent in February as the strengthening dirham pushed down import prices, according to data from the National Bureau of Statistics.

The inflation rate decreased by 0.06 percentage points compared to January. Declines in the prices of clothing, medical care and restaurants led the index down in February.

Clothing and footwear fell by 0.6 percentage points month-on-month, and 1.55 percentage points annually, which accounted for the difference between the February and January figures.

Housing and utility costs were 7.4 per cent higher than 12 months ago, and 0.2 percentage points higher than the previous month.

Last month, housing registered a month-on-month increase of 1.9 percentage points, indicating that the pace of acceleration is decreasing.

Recent reports from the real estate consultancies JLL and Asteco have predicted that the housing prices will remain static or fall across 2015.

JLL argues that Dubai house prices could fall by as much as 10 per cent this year, while Asteco points to a supply of 13,000 new homes, which it says is likely to “soften the market further”.

Food prices recorded a rise in February, increasing 0.2 per cent month-on-month. Different emirates faced different levels of food price inflation, however, with a monthly fall of 1.5 percentage points in Abu Dhabi, and a rise of 1.2 percentage points in Sharjah.

This appears to have been the result of a 10.9 per cent increase in the cost of oils and fats. Recent flooding in Malaysia has reduced the supply of palm oil, leading to a price rise.

The Food Price Index, published by the Food and Agriculture Organization of the United Nations, showed an overall decrease in food prices in February, with prices sinking to their lowest levels since 2010.

Food accounts for 18 per cent of the consumer price index.

Inflation fell overall in the two most populous emirates, Abu Dhabi and Dubai. Annual price growth fell 0.2 percentage points to 4.3 per cent in Dubai, while inflation fell to 4.6 per cent from 5 per cent in Abu Dhabi.

Since July 2014, the Bloomberg Dollar Index has risen by about 20 per cent against a basket of major world currencies. This has been driven by expectations that the Federal Reserve will raise interest rates later in the year, and the reviving pace of growth of the US economy.

The dirham is pegged to the dollar at Dh3.67 to $1.

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