DUBAI INFLATION INCHES UP IN MAY ON ELEVATED HOUSING COSTS

Inflation in Dubai is likely stay at the current moderate levels, as housing costs are expected to soften over the next few months, analysts say.

Headline CPI inflation in Dubai accelerated to 2.4 per cent year on year in May, up from 2.3 per cent the previous month, data showed on Monday. 

On the monthly measure, prices were 0.2 per cent lower, following a 0.3 per cent rise the previous month, Emirates NBD Research showed. 

Annual inflation over the first five months of the year has averaged 2.8 per cent, moderately higher than Emirates NBD’s full-year forecast of 2.5 per cent. However, most components of the basket continue to show only moderate price growth. “We anticipate that inflation should be maintained around current levels through the rest of the year, a slowdown from the 3.2 per cent pace seen at the start of 2025,” Daniel Richards, Senior Economist, said in a note.

Headline inflation measure would be far lower were it not for an ongoing sharp rise in housing and utilities prices, which account for around 40 per cent of the total CPI basket. There has been a moderate slowdown in the annual inflation measure in recent prints, but it remained elevated at 6.9 per cent in May, reflecting persistent upwards pressure on rents. 

Rent rises have been moderating in recent months, however, suggesting that the CPI measure might see a further slowdown, which would alleviate pressure on headline inflation. 

The second largest component of the CPI basket is food and beverages (11.6 per cent of the basket), which saw a marginal 0.3 per cent rise in prices in May, compared with the 0.2 per cent fall recorded in April. Relatedly, there was only modest upwards pressure in prices for restaurants and hotels (6.1 per cent of the basket) which were up 0.5 per cent year on year.

Transport is the third largest component of the basket at around 9.3 per cent of the total, and it has been the largest drag on headline inflation in recent months. In May, transport prices fell 8.8 per cent year on year, an even sharper deflationary print than the 7.6 per cent fall in April. The category includes petrol prices and last month, a litre of Super 98 cost Dh2.58 per litre, one dirham higher than in April but still 22.8 per cent lower than the Dh3.34 per litre it cost in May last year. Petrol prices were almost unchanged from their May levels in June, meaning they are 17.8 per cent lower than a year previous and will remain a drag on headline inflation. The current spike in Brent crude prices on the back of Middle Eastern instability could see some of this deflationary pressure ease, but even after the spike seen since Friday, at $73.8 per barrel at the time of writing, Brent futures remain 12.6 per cent lower than a year ago.

2025-06-16T11:41:29Z