Reuters/Dubai

A “For Sale” sign sits on display outside a Jumeirah village villa, a Nakheel housing project, in Dubai last month. UAE housing prices, the largest basket item with a 39% share, dropped 1.6% month-on-month in July and inflow of new housing units is expected to keep the market weak in the coming months
Inflation in the UAE eased to a three-month low of 1.3% on an annual basis in July helped by a weak housing market, data showed yesterday, and analysts expect price pressures to remain low in the coming months.
Consumer price growth in the world’s No 3 oil exporter has been holding above 1% so far this year, after an average 0.9% seen in 2010, which was the lowest annual level since the Gulf war started in 1990.
In June, inflation reached a six-month high of 1.7% and analysts polled by Reuters expected it to advance to 2.5% on average in 2011.
On the month, living costs fell 0.2% in July after a 0.4% increase in the previous month as declines in housing and transport costs more than offset a jump in food prices, data from the National Bureau of Statistics showed.
“Rents will continue to play a moderating role in inflation, while other categories are pushing inflation up,” said Giyas Gokkent, chief economist at the National Bank of Abu Dhabi.
Housing prices, the largest basket item with a 39% share, dropped 1.6% month-on-month in July and inflow of new housing units is expected to keep the market weak in the coming months. Transport prices dipped by 0.1%.
Food costs, which account for 14% of consumer expenses in the $298bn UAE economy, jumped 1.6% month-on-month in July after a 1.4% increase in June.
The UAE said in May it would fix the cost of about 400 foodstuffs and household products until the end of the year.
It has also called on retailers to offer discounts of up to 50% in the holy month of Ramadan, which started in August. Food prices usually surge during Ramadan as families enjoy more elaborate evening meals after the daylight fasting.
“Although there might be a short-term upside push from the ‘Ramadan effect’, we see price pressures remaining benign at least for the rest of 2011,” said Liz Martins, senior Mena economist at HSBC in Dubai.
UAE Economy Minister Sultan bin Saeed al-Mansouri said in May he expected inflation between 1% and 1.5% this year.
A survey showed this month that private sector business activity in the UAE expanded at its slowest pace in seven months in July as output rose at the weakest rate for a year and new order growth slowed sharply.
The second largest Arab economy is seen expanding by 3.7% this year after a 1.4% growth in 2010, when the UAE trade and financial hub Dubai grappled with a debt crisis in some of its state firms.
‘Dubai not to raise power, water tariffs’
Dubai’s government won’t increase electricity and water tariffs in the near future, the top official at the emirate’s energy decision making body said yesterday. “There will be no increase in the tariff of electricity and water consumption during the few coming years in Dubai,” Nejib al-Zaafrani, secretary general and chief executive officer of Dubai’s Supreme Council of Energy, said in an emailed statement.
The Supreme Council of Energy is the sole authority responsible for determining the electricity and water tariffs in the emirate. Tariffs “cannot be changed without a comprehensive study taking into consideration all the elements that will be affected by such step, as well as the common good of the UAE and its citizens,” al-Zaafrani said in the statement.