x Abu Dhabi, UAE Friday 21 July 2017

Inflation rises due to costs of food and education

Higher costs in education, food and housing pushed Abu Dhabi's inflation up last month compared with June last year.

Higher costs in education, food and housing pushed Abu Dhabi's inflation up last month compared with June last year. Average consumer prices advanced 3.38 per cent, data released by Statistics Centre - Abu Dhabi showed. Prices rose 0.21 per cent last month from May. Increases were driven by a 20.1 per cent rise in education costs between June last year and last month, with food and non-alcoholic beverages up 7 per cent.

Housing and utility costs, which are the largest component of the basket of consumer goods, increased 6.1 per cent between June last year and last month. In the first half of this year, inflation rose 2.5 per cent compared with the same period last year. Housing and utility costs were the biggest contributor to that rise, increasing an average of 5.3 per cent. Food and non-alcoholic beverage costs increased 4.4 per cent and education 20.1 per cent in the period.

The UAE's inflation last year was 1.5 per cent, its lowest since 2000 and far below the double-digit rates of 2007 and 2008. Economists do not soon expect a return to inflation levels from before the global downturn. Mark McFarland, the emerging markets economist at Emirates NBD, expects inflation to stay between 0.5 and 1 per cent in the near term. "We see no sign of increased pricing power," Mr McFarland said. "For an upswing in inflation we'd need property prices and the rent market to pick up, and there's no evidence of that."

Price pressures in education would also ease as schools in Dubai were unlikely to raise costs in the coming months. The UAE's annual inflation rate rose slightly in May to 0.9 per cent, driven by a 5 per cent rise in food costs. GCC economists have said rising food prices was the most pressing concern in a region that imports 70 per cent or more of basic foodstuffs. The UN estimated price pressure in meat, dairy and vegetable oils will push up the global food import bill by 11.5 per cent this year.

"The situation in food is even more worrisome, with growing concerns of a bad wheat harvest in Europe after widespread weather disturbances," Jarmo Kotilaine, the chief economist at NCB Capital, said in a note. tarnold@thenational.ae