UAE inflation nothing to make a meal of

The small increase in prices will not threaten the food budgets of consumers.

Consumers may be relishing a fall in rents and property prices over the past year but bills for groceries and meals out are still inching upwards, according to consumer price statistics released yesterday. The UAE's annual inflation rate - a measure of general price rises - accelerated slightly last month to 0.9 per cent, the Government's figures say. Prices were driven by a 5 per cent annualised rise in food costs.

Economists have recently pointed to higher global food prices as a possible driver of inflation in the Gulf, which imports most of its food. The UN's Global Food Price Index rose by almost 8 per cent in the 12 months to May. Last month alone, food prices in the UAE rose by 1.16 per cent, according to the National Bureau of Statistics. But despite the food price rise, Simon Williams, the chief economist at HSBC Middle East, said he did not see any serious inflation threat. The UAE's inflation rate last year was 1.5 per cent, its lowest level since 2000 and well below the double-digit rates of 2007 and 2008.

"The numbers say to me that there is no real inflationary pressure in the UAE," said Mr Williams. "The small uptick in some categories is of little consequence and is largely offset by downward pressure on the prices of other goods and services." The food price increase was accompanied by a 0.71 per cent rise in prices for restaurants, cafes and hotels and a 0.41 per cent rise in transport costs last month.

The biggest declines came in the "miscellaneous goods and services" category, which was down 2.12 per cent, and the housing category, which was down 0.52 per cent for the month. Mr Williams said he was projecting inflation this year of about 1 per cent, in line with earlier forecasts from the Government and international economic bodies. In February, Sultan al Mansouri, the Minister of Economy, predicted inflation of less than 2 per cent this year. The IMF predicts a 2.2 per cent rise in consumer prices this year followed by a 3 per cent rise next year.

Even if that means dinner is a bit pricier, economists say those are rates consumers should cheer about: they are, at least, much lower than in 2007 when inflation stood at 11.1 per cent, or 2008, when it was 12.3 per cent. [e-mail]