United Arab Emirates: Inflation ticks down in June
July 30, 2018
Consumer prices increased 0.37% in June from the previous month, contrasting the 0.06% month-on-month fall observed in May. This represents a positive news after several months of across-the-board price declines, which were in good part due to the introduction of a 5% VAT in January which forced producers to slash their margins in order to maintain demand afloat. This signals that the effect of the VAT introduction is being absorbed by the economy and that prices are stabilizing.
The June reading was largely driven by a sharp increase in the prices for transportation; textiles, clothing and footwear; as well as a slightly milder rise in food and beverages prices. On the other hand, the month-on-month print was held down by a moderate fall in the price of housing, water, electricity and gas, which weigh a around a third of the Consumer Price Index. As for other expenditure categories, the prices of education, medical care, communications, and restaurants and hotels were essentially flat from the previous month in June, while prices for furniture and household goods as well as tobacco recorded modest increases.
Meanwhile, inflation fell from May’s 3.5% to 3.3% in June. Annual average inflation inched up from 2.6% in May to 2.7% in June.
Author: Joffrey Simonet, Economist