x Abu Dhabi, UAEWednesday 26 July 2017

Shoppers in capital feel pinch as food costs rise

Food and drink costs in Abu Dhabi rose last month as a softening in global prices is yet to feed through to consumers.

Grocery shoppers in Abu Dhabi were hit in their pockets last month as food costs surged again despite falling global prices.

Prices for food and non-alcoholic beverages rose by 8.2 per cent last month compared with September last year, data released by Statistics Centre - Abu Dhabi (Scad) showed yesterday.

Overall inflation in the capital, however, was offset by lower price rises and even price declines among other items in the consumer price index. As a result, inflation was an annualised 1 per cent.

Food and drink costs accounted for more than 60 per cent of consumer price rises in the capital in the first nine months of the year. Last month's rise signals that consumers have yet to feel the benefits of a fall in food prices globally.

"It depends on the dynamics of any given market price and function. There's a great deal of divergence, as it depends on the wholesalers, retailers and political pressures," said Jarmo Kotilaine, the chief economist of National Commercial Bank in Saudi Arabia.

World food prices fell for a third month in September, according to the UN's Food and Agriculture Organization, the longest stretch of declines in more than two years. Concerns about falling demand linked to cooling economic growth have caused prices of grains and other commodities to slip. International prices had been rising because of a combination of bad harvests and a weak US dollar.

The Ministry of Economy in May reached an agreement with retailers to fix the cost of about 400 foodand household items until the end of the year.

Other components of the consumer price index in the capital fell last month. Prices in the clothing and footwear group fell by 13.1 per cent.

Scad did not detail the performance of housing costs and water and electricity bills, which have the largest weighting in the index.

During the third quarter, prices for food and non-alcoholic beverages rose 8.5 per cent, with housing and utility bills increasing 1.4 per cent.

Property rents had been falling in the capital as an oversupply of capacity and low demand for new units dragged on the property market.

On a monthly basis, Abu Dhabi consumer prices increased by 0.4 per cent last month compared with August.

Across the country, inflation dropped to an 18-month low of 0.6 per cent in August compared with the same month last year.

Sultan Al Mansouri, the Minister of Economy, forecast in May that inflation would rise from 1 per cent to 1.5 per cent this year.

The muted inflationary environment represents a turnaround from the double-digit rates of 2007 and 2008.

tarnold@thenational.ae