March data reveals slight dip in Dubai’s inflation
Decline is attributed to lower prices of specific goods and services
Dubai’s inflation witnessed a slight decrease in March, dropping to 3.34 percent compared to 3.36 percent in February, according to official data.
The decline in inflation is attributed to lower prices of specific goods and services, notably in the food and transportation sectors. Dubai’s Consumer Price Index rose to 110.77 points in March, compared to 110.50 points in the previous month, due to the rise in prices of key expenditure groups and services, including insurance and financial services by 8.67 percent, housing, water, electricity, gas, and fuel by 6.34 percent, and education by 3.62 percent. However, despite the overall decrease in annual inflation, some sectors experienced price hikes. These areas included transportation, which witnessed a 1.75 percent increase, and housing, water, electricity, gas, and fuel, which saw a 0.58 percent increase. Speaking to Arab News, economist and policy adviser Mahmoud Khairy highlighted that inflation affects sectors differently based on various factors such as economic structure and market dynamics. “The most prominent and immediate effect of inflation is on consumption, potentially reducing consumers’ purchasing power and altering spending patterns,” he said.
Khairy also emphasized the sensitivity of the housing and real estate markets to inflationary changes in the Gulf Cooperation Council region.
“Construction costs and property values may increase which will put extra burden on financing needs,” he added.
In addition to the decrease in inflation, food and beverage prices in Dubai in March decreased by 0.36 percent, along with drops in
furniture prices by 0.06 percent and information and communication by 0.02 percent.
The cost of restaurants and hotels also decreased by 2.15 percent, while prices of insurance and financial services lowered by only 0.08 percent.
In neighboring Saudi Arabia, inflation also fell in March, registering a rate of 1.6 percent compared to 1.8 percent the previous month.
Shifts in the food and beverage sector primarily drove the decline. Khairy explained that inflation expectations influence consumer behavior, similar to preparing for a weather forecast.
“When people expect prices to rise, they often rush to buy things sooner to avoid paying more later,” he said.
Investors closely monitor inflation, tweaking portfolios based on their predictions. Similarly, policymakers and central banks rely on inflation expectations to steer the economy, akin to checking weather forecasts for planning. Regarding challenges and opportunities for GCC economies, Khairy noted the reliance on oil revenues, currency pegs to the US dollar, and geopolitical tensions in the Middle East as factors influencing inflation and economic stability.