Abu Dhabi’s consumer price index rebounded in September, inching up 0.2% after resuming its downward trajectory in August, according to data(pdf) from the Abu Dhabi Statistics Center. On a monthly basis, inflation saw a 0.5% increase, after having edged down 0.1% in August, separate data (pdf) shows.

Prices of ins. and financial services led annual price increases again in September, climbing 6.6%. This was followed by 4.1% increases in the costs across the household equipment and routine household maintenance, while personal care, social protection, and miscellaneous goods recorded a 2.5% increase. Housing, water, electricity, gas, and other fuels — the largest component in the index — also picked up 2.4%. Food and beverage prices also edged up 0.5% after being deep in deflation territory during July and August, while tobacco prices rose 1.0% during September.

Some sectors are still in deflation territory on a y-o-y basis, including clothing and footwear, which recorded the most significant dip for the third consecutive month (-9.2%). Transport prices, the second largest component of the inflation basket, also fell 3.5%. Recreation and culture saw a 6.0% decrease.

On a monthly basis, recreation and culture recorded the highest increase among all categories during the month, rising 2.8%, followed by a 2.1% increase in food and beverage prices, and a 0.9% rise in personal care, social protection, and miscellaneous goods. Housing, water, electricity, gas and other fuels saw a 0.4% m-o-m price increase, while clothing and footwear rose 0.3%. Transport, restaurants and hotels, and tobacco and household equipment were all in deflation territory on a m-o-m basis.

Abu Dhabi inflation is still much cooler than in Dubai, where annual price growth accelerated again in September to 2.88%, after slowing to 2.43% in August.

But why? The capital enjoys lower rental inflation compared to Dubai — 2.5% versus 5.8% — and transportation accounts for a bigger portion of its overall basket, meaning that continued deflation from that segment has a bigger impact, Khalij Economics Director Justin Alexander told EnterpriseAM.

The bigger picture: The Central Bank of the UAE (CBUAE) lowered in September its inflation forecast for the UAE this year by 0.4 percentage points to 1.5%, which it attributed to falling food and transport costs. This is broadly in line with the IMF’s revised inflation forecast of 1.6% in 2025, which marks a significant downgrade from the fund’s earlier estimate of 2.1% inflation for the year.

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