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Mon 11 Nov 2019 03:32 PM

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Prices continue to fall in Dubai, underpinning deflation

Dubai's selling prices dropped in October at the fastest pace since February 2016, according to IHS Markit report

Prices continue to fall in Dubai, underpinning deflation

Deflation has persisted in the Gulf for much of this year. (Photo for illustrative purposes only)

Dubai’s selling prices dropped last month at the fastest pace since February 2016, according to IHS Markit.

Its Dubai Purchasing Managers’ Index rose for a third month to 54.6 in October, staying well above the threshold of 50 that separates growth from contraction.

By contrast, IHS Markit’s gauge tracking business conditions for the United Arab Emirates as a whole - of which Dubai is a part - was unchanged at its lowest level in almost a decade.

The rate at which prices are falling in Dubai is “underpinning the challenge of deflation that the UAE has experienced this year,” David Owen, economist at IHS Markit, said in a report Monday.

“A good proportion of panelists resorted to further price drops during October, in order to achieve higher sales, as has been the case for the past year-and-a-half.”

Although deflation has persisted in the Gulf for much of this year, made worse by a prolonged slump in the property market, consumer-price growth is stabilising at a higher level in Saudi Arabia and has already turned positive some months in Qatar. But in the UAE, it’s held around negative 2 percent for three months straight, approaching minus 3 percent in Dubai.

The heavy discounting in the face of weak demand pushed up Dubai’s new order growth, which improved for the first time in five months in October and resulted in greater hiring, according to IHS Markit. The rate of job creation strengthened to a 21-month high, it said.

“Cost pressures are weak though, while output levels are still rising at a sharp pace, suggesting that businesses are coping with the squeeze on their margins for the time being,” Owen said.