UAE: Consumer prices tumble sharply in January owing to high base effect from VAT introduction
Consumer prices fell 0.12% month-on-month in January, improving from the 0.31% decline recorded in December. The January print came on the back of lower prices for transportation; housing, water, electricity and gas; and clothing and footwear, which were partially offset by rising prices for food and beverages; restaurants and hotels; furniture; recreation and culture; and communications.
In year-on-year terms, consumer prices plunged 2.4% in January, markedly contrasting the 0.3% print registered in December. The sharp decline observed in the month was largely due to a steep base effect, as the government had introduced a 5% Value Added Tax in January 2018, which was progressively absorbed by the economy over the following months.