x Abu Dhabi, UAE Friday 21 July 2017

Property to figure less in UAE inflation figures and the basket of goods

Latest: Updates will be made to the basket of consumer goods used to calculate inflation as the economy changes shape.

The basket of goods used to calculate consumer price inflation is to be updated to give less weighting to property and more value to electronics and other goods.

Officials say the overhaul of the consumer price index will reflect changes in spending patterns and the overall economy since the global financial crisis.

It will also taken into account the greater importance of technologies such as mobile phones in recent years.

"The system will stay the same but the weights within the basket will be different as the economy has changed since the last data was taken," said a spokesman from the National Bureau of Statistics (NBS), who asked to remain anonymous.

The IMF has encouraged the country to regularly update inflation data to ensure its accuracy and relevance as an important economic indicator.

Data for the current basket has been fixed since 2007. But the economy has changed shape dramatically since then.

Housing services, made up of rental and utility bills, account for 39 per cent of the basket. Food prices take up 13.9 per cent of the index.

At the time, the weightings reflected a booming economy as prices of property, oil and other commodities soared. As a result, inflation climbed to 11 per cent in 2007.

Officials say the weighting allocated to some groups is no longer accurate. For example, property prices have slid by more than 50 per cent as credit dried up during the financial downturn.

The cost of other items have risen. Electricity and water bills have increased, as have fuel costs after a double hike in petrol prices by the government last year. Education fees have edged up too.

In addition, food prices have surged in recent months as bad harvests in important exporting nations put pressures on supply.

Inflation is forecast to reach 4 per cent this year, according to the IMF.