Inflation in Dubai saw a 0.6 per cent increase month-on-month in August, as per the latest data from the Dubai Statistics Centre. This rise marks a slight improvement from the modest deflation observed in July. On a yearly basis, the Consumer Price Index (CPI) inflation climbed to 3.38 per cent, a marginal increase from the 3.32 per cent recorded in the previous month. Emirates NBD analysis indicates that inflation has been averaging 3.6 per cent year-on-year up to August, reflecting a modest acceleration from the 3.3 per cent year-on-year rate recorded for 2023.
Inflation drivers in Dubai have remained consistent throughout 2024. Housing costs have increased by over six per cent year-on-year each month in 2024, with the August housing and utilities component rising by 6.9 per cent year-on-year, according to Emirates NBD Research. Edward Bell, head of market economics at Emirates NBD Research, noted that the rise in housing inflation is a reflection of the underlying increase in property purchase and rental costs over recent years. Given its significant weight in the overall CPI basket, accounting for more than 40 per cent, housing costs exert a strong influence on overall inflation.
In other August data, transport costs increased by 0.3 per cent month-on-month but showed a decrease on an annual basis. The food and beverage subcomponent also saw a month-on-month increase of 0.6 per cent and a year-on-year rise of 2.8 per cent. Bell highlighted that transport costs, which constitute more than 9 per cent of the basket, tend to exhibit greater volatility on a monthly basis due to their dependence on market costs for oil and refined products.
Recreation prices also experienced a monthly jump, rising 4.6 per cent month-on-month and reversing the annual deflation seen in July. Other significant contributors to inflation in Dubai this year include financial services, which increased by 5.9 per cent year-on-year in August, and education fees, which have remained stable at 3.1 per cent year-on-year for the past five months.
Emirates NBD anticipates Dubai's CPI inflation to average 3.5 per cent year-on-year in 2024, an acceleration from the 3.3 per cent recorded last year. Bell noted that cooling oil prices and energy costs will likely act as a drag on prices in the final months of the year. Brent oil futures have averaged $73 per barrel since the start of September 2024, compared to $92 per barrel for the same period in 2023. However, housing price inflation will serve as a floor for CPI as the index increasingly reflects higher housing prices.
