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Relief for online shoppers as food price inflation slows

Shoppers at a supermarket in Sanaa, Yemen. In the UAE, inflation in the cost of staples such as flour is slowing Reuters/Khaled Abdullah
The bank reiterated it is ready to raise rates further as needed to rein in inflation that is expected to rise into next year
  • Index that tracks ecommerce prices for staples reflects ‘turbulent time’
  • Price of tea has increased by almost 26% year-on-year
  • Quarterly ecommerce figures show softer price rises in most categories

The price of consumer staples bought online increased in 2022, but shoppers in the UAE are now beginning to see costs plateau.

The most significant rise was in the price of tea, which increased by almost 26 percent year-on-year in Q1 2023, according to the UAE Ecommerce Consumer Price Index compiled by consultancy Pattern.

The price of coffee had a more moderate year-on-year increase of just over 4 percent.

Pattern’s general manager for the Mena region, David Quaife, said it had been a “turbulent time” for businesses and attributed the rises to supply chain disruptions “coupled with increased costs of materials, labour and shipping”.

This turbulence appears to be diminishing, however, with the quarter-on-quarter figures showing more modest increases in most categories.

“Year-on-year there have been massive increases. It varies, but let’s say around 20 percent on average, 22 percent in some cases,” said Quaife. “Quarter-on-quarter there has been very small growth – and that’s what we want to see.”

The Central Bank of the United Arab Emirates is forecasting that official Consumer Price Index inflation will slow to 3.2 percent this year, from 4.8 percent in 2022, as a result of "softer price increases in all categories, especially transport and food and beverages".

The bank added in its latest quarterly update: "While the rise in inflation is in line with global trends, it is significantly below the global average."

Pattern's index uses data from ecommerce giant Amazon to track prices for a range of food and beverage products, including flour and rice, as well as personal care items and household detergents.

It found that rice did not increase in price during the first three months of the year, while washing up liquid was up by less than 1 percent and soap was down 7 percent quarter-on-quarter.

Quaife said that although he did not expect prices to come down in the UAE, this slowing trend is set to continue in the second quarter.

“Increases will be there but on a smaller scale,” he said.

The UAE’s household spending is predicted to grow by a real rate of 4 percent year-on-year in 2023, according to Fitch Solutions’ Consumer Spending Outlook – the same rate as in 2022.

The increase is largely attributed to rises in domestic fuel prices and rental costs, as well as strong demand-side pressures in 2022, which led to tightening monetary policy and lower real household spending growth.