Dubai inflation hits 4.8% as fuel and food costs filter deeper into the economy

Dubai inflation accelerates in April: Dubai’s annual inflation jumped to 4.8% in April as fuel, freight, and imported food costs rippled through the economy, accelerating sharply from 3.8% in March, according to data by the DubaiStatisticsCenter. On a monthly basis, prices were up 1.3%, accelerating from the 0.9% uptick in March.

The biggest jump came from the transport segment, which carries an 11.7% weighting for Dubai’s overall CPI, pushing up overall inflation. Transport prices were up 11.1% y-o-y and 9.2% m-o-m as the war triggered higher fuel prices and freight costs, which started to filter through the economy.

It all boils down to the war, as expected: “The war-time impact of inflation has been felt across industries that depend upon oil and passage through the Strait of Hormuz,” Head of Research at Confluence Consultants Amandeep Ahuja tells EnterpriseAM UAE. Among consumers, rising grocery bills and higher fuel prices have become the clearest signs of inflation filtering into daily life, she added.

Firms are now passing higher input costs directly on to consumers through higher selling prices, broadening inflationary pressure across the economy, according to recent PMI surveys cited by Emirates NBD.

Food prices saw a 1.5% m-o-m increase on the back of a conflict-induced spike in shipping and transport costs, according to Emirates NBD’s latest report (pdf). Other war-exposed sectors like restaurants and hotels (+1.0%), and ins. (+0.4%) also saw price rises, albeit more muted than for transport and food.

On the flip side, prices dropped by 2.4% m-o-m in the recreation, sport, and culture segment, while holding steady in the education and health baskets.

Housing inflation in Dubai remained sticky despite signs of moderation in monthly rent growth. The largest basket saw monthly price increases moderate to 0.3%, even as it posted 7.4% annual inflation rate due to a sharp uptick at the start of the year.

That’s likely a lagging indicator, though, Khaliji Economics Director and Gulf analyst at GlobalPartners Justin Alexander tells EnterpriseAM. “The impact of war is likely to stabilize or even reduce rents later this year,” Alexander forecasts.

What to expect looking ahead

Emirates NBD expects inflation in Dubai to peak at 5.4% in May before moderating through 2H to around 2.9% by December as fuel costs ease and supply chains normalize.

Price increases might be a bit sticky: “Should the Strait of Hormuz reopen tomorrow, prices may not adjust immediately, but business sentiment would improve as confidence in supply chains resumes,” Ahuja said. “The bigger concern and, arguably, the root of the inflation is the uncertainty,” she added.