Mr Sultan Bin Saeed Al Mansouri UAE minister of economy announced that UAE’s inflation rate reached 11.1% in 2007, influenced by increases in the prices of goods and services. This figure was derived by measuring the percentage change in prices of a representative basket of goods and services consumed by the average UAE household.

Research conducted by the ministry of economy’s consumer price index division revealed that the 2007 rate resulted from varying increases in the consumer prices of all expenditure groups. The house rent and related house items category recorded the highest gain among all groups at 17.5%, followed by other goods and services at 16.8%. Increases in the average prices of other expenditure items ranged from 3% to 8%.

Mr Al Mansouri highlighted the importance of the inflation index derived from the CPI, referring to it as an essential and widely used government tool to draft policies on salary and wages and to adjust consumer income in areas such as transfer payments to social welfare recipients.

The house rent and related house items group currently has the highest weight in the CPI at 36%. Based on the actual contribution of the expenditure groups to the 2007 inflation rate, the category emerged as the main cause of inflation, comprising 6.5% of the total 11.1% inflation figure or around 58.6%. Other goods and services followed at 1.4 of the total percentage or about 12.8% contribution. The other expenditure groups comprised less than 1% to total inflation.

The CPI Division identified two basic factors that made the rent and household item category a major inflationary source, a significant increase in rental rates in 2007 and the large weight of the category in household expenditure.