United Arab Emirates: Inflation inches up in April
May 22, 2018
Consumer prices fell 0.23% in April from the previous month, a softer decrease than the 0.65% month-on-month fall observed in March. This evolution suggests that prices are starting to stabilize after several months of across-the-board declines, resulting from price adjustments following the introduction of a 5% VAT in early January. Prices increased sharply that month before falling in subsequent months as large numbers of companies kept compressing their margins in a bid to support demand.
While evidence indicates this was still the case in April to some extent, several product categories recorded improving price dynamics, with prices either increasing, or decreasing at a softer pace. The improvement was notable among basic item categories such as food and beverages; textiles, clothing and footwear; and transportation. Overall, according to the Federal Competitiveness and Statistics Authority, the biggest negative contribution to the monthly reading in April came from decreases in the prices of housing, water, gas and electricity—which carries a weight of over a third of the index. The biggest positive contribution to the price index was caused by increases in the price of textiles, clothing and footwear; and recreation and culture, in that order.
Meanwhile, inflation edged up marginally to 3.5% in April, from 3.4% in March. Annual average inflation inched up from 2.4% in March to 2.5% in April.
Author: Joffrey Simonet, Economist