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Fri 16 Dec 2011 10:55 AM

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Inflation falls in Dubai as food, housing costs drop

Annual inflation edges lower to 0.2% in November; analysts expect it to remain under control

Inflation falls in Dubai as food, housing costs drop
Inflation in Dubai fell in November as food costs declined

Dubai's annual inflation rate edged lower to 0.2 percent in November as food prices dropped and housing costs were steady, latest data showed, as analysts forecast only soft price pressures in the real estate sector next year.

Consumer price growth in Dubai has held below 1 percent for most of the year as bank lending remains slow and the property sector weak in the wake of the emirate's 2009 debt crisis. Inflation was at a three-month high of 0.3 percent in October.

Prices were unchanged on a month-on-month basis in November, after a 0.3 percent increase in the previous month, the data from the Dubai Statistics Centre showed.

"Inflation is not a concern this year and next; we don't see pressures from importers such as food or clothing. We continue to see softening in local demand and in the real estate mainly," said Mahdi Mattar, chief economist at CAPM Investment in Dubai.

Last week, Abu Dhabi reported that its annual inflation rate slowed to a 23-month low of 0.6 percent in November from 0.9 percent in October. The UAE has yet to release November consumer price data for the whole seven-member federation.

In Dubai, food costs, the second largest consumer expense with an 11 percent weighting in the index, decreased 0.8 percent month-on-month after a 0.5 percent rise in October.

"Food prices were high during summer and Ramadan (holy fasting month), and then started to get back down," Mattar said.

Housing prices, the biggest component in the Dubai basket, were unchanged for the second consecutive month in November.

Analysts polled by Reuters in September predicted average inflation in the UAE of 2.0 percent in 2011 and 3.0 percent in 2012, up from 0.9 percent last year.

But Mattar said: "In 2012 we will see more delivery in real estate in Dubai which will put further pressure on prices. The main component which is housing will continue to be soft."

UAE central bank governor Sultan Nasser al-Suweidi said in June that inflation this year was likely to be lower than 3 percent as the real estate sector remained under pressure.

The country's economy minister called this month for measures to prevent traders and commercial outlets from hiking prices, after President Sheikh Khalifa bin Zayed al-Nahayan ordered a doubling of salaries of some state employees in several sectors.