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Dubai inflation edges up, food costs fall

DUBAI (Reuters) — Dubai inflation edged up to 0.4 percent on an annual basis in January, but living costs in the emirate fell slightly from the previous month due to a drop in food prices, data showed on Monday.

Annual inflation in the United Arab Emirates member hovered below 1 percent for most of 2010 as lending and the property sector remained weak following debt problems experienced by some Dubai state-owned companies, although trade has picked up strongly.

Inflation was 0.3 percent in December, putting the full year figure at 0.6 percent after 4.0 percent in 2009. Inflation eased to 0.5 percent in January.

“The last time inflation was so low was more than a decade or two (ago),” said Giyas Gokkent, chief economist at the National Bank of Abu Dhabi.

“The overall outlook is for continued low single-digit inflation, but potentially with a reversal of the decline in the annual figures in the coming months,” he said.

On the month, consumer prices in Dubai, the region’s trade hub, decreased by 0.1 percent in January, after a 0.3 percent fall in the previous month, data from the Dubai Statistics Center showed.

Inflation in the UAE, the world’s third largest crude exporter, eased to 1.6 percent in January, data showed last month, helped by an unexpected drop in food prices.

High global food prices, which helped trigger popular revolts in several Arab countries, are one of the factors seen lifting inflation in the Persian Gulf, the world’s top oil exporting region, this year.

Real estate costs, the largest consumer expense in Dubai at nearly 44 percent, rose 0.1 percent month-on-month in January after staying flat in the previous month and analysts expected continued supply of new housing to keep rents in check.

Food prices in Dubai, which has been spared the civil unrest that has brought Libya to the brink of civil war and caused ructions in nearby Bahrain and Oman, plunged 1.6 percent in January, the second monthly drop in a row. Transport costs rose by 0.3 percent month-on-month.

In December, a Reuters poll showed analysts forecasting annual inflation in the UAE, the second largest Arab economy, at 2.8 percent this year.

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