Why Are Dubai Consumer Prices Constantly on the Rise?

The inflation rate in Dubai has fallen in February, according to official data, along with the declining value of some foods and beverages. But most residents in the emirate didn’t feel it. Why does it seem consumer prices are constantly on the rise? Because as a matter of fact, they are!

Earlier this week, data released by Dubai Statistics Centre showed that inflation fell to 4.3% in February from the 4.5% rate in January. Compared to February 2014, it fell 2.6%. Prices for foods and beverages (comprising 11% of the total) declined 0.6% from the same period last year, but increased 0.2% from January. In fact, Dubai’s inflation rate was at its highest level in January since May 2009. According to the figures, published on Dubai Statistics Centre’s website, 2008’s 10.77% rate declined steadily (4.03% in 2009; 0.55% in 2010; 0.52% in 2011) to -1.71% in 2012. From there, however, inflation starts to increase, posting 1.31% in 2013 and 3.37% in 2014. In short, inflation in Dubai increases at a steady pace from 2012.

Also, housing and utility costs in February surged 7.6% year-on-year and 0.7% from January. This is an essential factor, as these costs account for nearly 44% of all consumer expenses. In January the overall Consumer Price Index (CPI) for the UAE increased by 0.69% from December 2014 to reach 123.49 points. Compared to the same month in 2014, however, this is an increase of 3.67%. The data, released by the National Bureau of Statistics, also explains how prices changed for different expenditure groups. Housing went up 2.48%, miscellaneous goods and services increased 1.14%, furniture and household goods were up 0.76%, while for restaurants and hotels people had to pay 0.13% more, and 0.04% for recreation and culture.

The CPI is calculated on the basis of average price changes of a representative basket of goods, weighted so that the items that account for the largest percentage of total expenditure contribute the most to the overall inflation figure. It compares current prices and those from a year ago. The CPI also finds little declines in some consumer expenditures – food and soft drinks (-1.68%), textiles, clothing and footwear (- 0.45%), medical Care (- 0.32%), transportation (- 0.25%) and communications (- 0.03%).

However, in the long term, inflation has increased, with most prices for foods, housing, and utilities firmly rising since 2012. No wonder expats complain from higher cost of life. Adding the inflating costs, linked with taking care of a child in Dubai, life is indeed becoming very expensive.