Shoppers in Abu Dhabi enjoyed a break last month after the cost of their weekly shopping soared last year.
The cost of food and non-alcoholic items fell by 1.6 per cent from the previous month, according to data from Statistics Centre-Abu Dhabi (SCAD). The dip helped to bring down the overall cost of the index by 0.3 per cent over the same period.
The decline reflects a fall in global food prices in the second half of last year. It can take up to six to nine months for global food price levels to be passed on to local consumers, say economists.
"We said at the start of the year that slower food price rises would help to keep prices contained this year and that is now happening," said Khatija Haque, a GCC economist at Emirates NBD.
Food and non-alcoholic beverage costs were the single biggest factor in fanning inflation last year as shops passed on the pinch of higher prices to shoppers. Costs of food and non-alcoholic beverages edged up 7.5 per cent last year.
But worries about the strength of the global economy helped to weaken the cost of basic items in the second half of last year as consumer demand waned.
Signs have emerged at the start of this year, however, that higher world food prices could be back on the agenda. Food prices, as measured by the UN's Food and Agriculture Organization (FAO), rose nearly 2 per cent last month to register the fist gain in six months. High energy prices, exchange rates and strong equity markets could push prices up again this month, the FAO warned last week.
Despite a month-on-month dip in food prices, consumers in Abu Dhabi still faced a rise in costs on a yearly basis. Food and non-alcoholic beverages rose by 4.7 per cent last month compared with January last year.
Overall, average consumer prices edged 0.8 per cent higher during the same period.
Economists say weak demand in the housing market should also help to keep a lid on inflation this year. SCAD did not supply a month-on-month comparison of housing prices for January. Across the year, housing costs fell 0.4 per cent.
The price of housing, water, electricity, gas and other fuels has the largest weighting on the consumer price index, at 37.9 per cent. Food and non-alcoholic beverages are the next biggest contributor, at 16.1 per cent.
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