Dubai inflation eases even as fuel costs rise

Dubai's inflation rate ticked downward slightly in September compared to the previous month, despite increased fuel costs driving up petrol prices. The annual inflation rate for the year stood at 5.03 percent, down from 5.54 percent in August and the 5.7 percent peak reached in June. These figures were released by the Dubai Data and Statistics Establishment on Tuesday.

Dubai's General Monthly Consumer Price Index saw a 0.05 percent decrease in September, falling due to lower airfares and cheaper holiday packages. Airfares decreased by 23.44 percent, while holiday packages fell by 12.47 percent from the August level. However, transportation remained the primary driver of the rise in consumer prices in September, increasing by 14.7 percent.

This surge was fueled by a 37.52 percent rise in fuel and lubricant costs for personal transport and a 13.48 percent rise in air passenger transport, according to the latest government data.

Transportation accounts for 9 percent of Dubai's Consumer Price Index basket and has been the main contributor to inflation in the emirate over the past few months due to a rise in petrol prices. The UAE introduced fuel subsidies in 2015, and prices are evaluated monthly based on global market movements. Petrol prices in Dubai rose for a third consecutive month in October as global oil prices remained elevated, driven by geopolitical concerns in the Middle East.

Brent crude, which hovered around $110 per barrel in September, has largely stayed above $100 recently as the Strait of Hormuz remains a flashpoint. The ongoing attacks on Saudi infrastructure in the Red Sea by Houthi rebels in Yemen have further heightened risks to energy supplies from the region.

Despite economic challenges, Dubai's economy has largely avoided the deeper slump experienced by some neighbors. The non-oil private sector business activity in the emirate, one of the largest business and tourism centers in the Middle East, continued its strong growth trend. The Purchasing Managers' Index stood at 54.5 in September, up from 54.1 in August, indicating a "solid improvement" in Dubai, with the fastest pace of growth in 2026, as reported by S&P Global Markets Intelligence.

The boost to the emirate's non-oil economic activity was driven by a sharp increase in output, rising orders, and employment growth. Tourism and retail sectors have also rebounded from the initial shock of the war, while property, a top contributor to the emirate's economy, has held up well. The food and drinks category increased by 8.05 percent annually, while housing, utilities, and fuel rose by nearly 6.23 percent, "as a result of the growth in average residential rental prices across most areas of the emirate in September."