Dubai’s annual inflation accelerated to 2.88% in July, up from 2.37% in June, according to the Dubai Statistics Center (pdf). Some components of the basket recorded moderate price growth, while other segments remained in deflation territory.

Still slowing, but at a smaller clip: Transport prices, making up just over 9% of the index, fell to -3.40% y-o-y in July, slowing from the -7.37% y-o-y reading in June. “The key differential between June and July that saw headline inflation pick up was a smaller decline in transport prices,” Emirates NBD said in a research note (pdf). This was mainly led by variations in petrol prices at the pump, which are themselves affected by global benchmark prices.

REMEMBER- The Fuel Price Committee raised fuel prices across the board in July by more than 4% for the first time in months. This month, fuel prices are down though diesel — the only outlier — is up 5.7%.

Zooming in: A liter of Super 98 cost AED 2.70 per liter in July, marking a 9.7% y-o-y dip. Yet, this was a less significant drop from June’s 17.8% dip. “In August, petrol prices are 11.8% lower y-o-y, meaning that transport will likely be a greater drag once more. We expect this trend will continue given that Brent crude averaged USD 74.8/b over August to December last year, much higher than the present USD 65.8/b, or indeed our 3Q and 4Q forecast for an average USD 65/b,” according to Emirates NBD.

Also driving the uptick: Prices for housing, water, electricity, gas, and other fuels — the largest component in the inflation basket — rose by 6.37% y-o-y, slightly down from 6.62% y-o-y in June, and 6.85% y-o-y in May. Despite the y-o-y increase, prices in the sector continue a downward trajectory since the beginning of the year.

Food and beverages saw a mild price increase of 0.36% y-o-y in July, compared to 0.6% y-o-y in the previous month. Education prices grew at 2.63% y-o-y during the month, in a slight increase from 2.47% a month earlier. Restaurants and accommodation services recorded 0.66% y-o-y price growth, compared to 0.67% a month earlier.

On a monthly basis, prices inched up for the second straight month, growing 0.42% in July, compared to 0.28% in June, according to the statistics center’s monthly inflation report (pdf).

Dubai’s consumer price index slightly rose to 114.78 in July, up from 114.30 points in the previous month, according to the Dubai Statistics Center report (pdf).

Looking ahead: The Central Bank of the UAE (CBUAE) slightly lowered in June its inflation forecast for the UAE for 2025 down by a 0.1 percentage point to 1.9%, which it attributed to a “continuous downward trend in transportation costs” and “moderating energy prices.” Meanwhile, Emirates NBD maintained its 2025 inflation forecast at an average of 2.5%, after averaging 2.7% y-o-y over January to July, “with the expectation that lower oil prices through the close of the year will soften the headline inflation rate through the remainder of 2H,” it said in the note.

Tags: