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Abu Dhabi: "Deflation Becoming Entrenched"

In March 2007, Fortune magazine called Abu Dhabi, the capital of the United Arab Emirates, "the richest city in the world."

In June 2014, Forbes had this headline: "Abu Dhabi: So Blindingly Rich It's Almost Sickening."

Yet, on Aug. 14, 2019, Bloomberg calls attention to price deflation. Here's the brief article:

Deflation is becoming entrenched in the United Arab Emirates' capital.

Consumer prices in oil-rich Abu Dhabi declined for a second consecutive month, falling 1.4% in July from a year ago, according to a release by the emirate's statistics service. The drop was the biggest since at least 2015, and the sixth in seven months, according to data compiled by Bloomberg.

RoughRoad

An index of prices for housing, water and electricity, which holds the biggest weight among a dozen constituents, dropped 3.6% last month.

"In the foreseeable future, it is hard to see the housing sector bottoming out, given current market conditions," said Mohamed Bardastani, the Dubai-based senior economist at Oxford Economics. "A mismatch in the supply and demand curve and weak employment numbers have weighed down on housing prices, and that is the case in both Dubai and Abu Dhabi."

The deflationary momentum began in the U.A.E., and neighboring Saudi Arabia, because the introduction of value-added tax in 2018 created a high base for comparison. The prolonged slump in housing costs that's now putting broader price growth into negative territory has kept it going.

This article brings to mind these words from the July 2018 Elliott Wave Theorist:

Another Big Reason Deflation Is Likely: No One Expects It

Prepare for what Elliott Wave International's global analysts see ahead by reading the free report, "What You Need to Know Now About Protecting Yourself from Deflation."

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