Annual consumer inflation in the UAE averaged 1.9 per cent in the first ten months of the year but prices fell 0.1 per cent month-on-month in October itself, official figures showed on Tuesday.

Year-on-year only clothing, health and entertainment categories decreased in cost, the ministry of economy's national bureau of statistics said in a statement published on its website.

Rent and utility prices increased 0.96 per cent year on year in the first ten months, according to the figures.

Monica Malik, chief economist with EFG Hermes, said the housing component figure is "surprising".

"We had expected a far negative inflation rate given the fall in rental prices in Dubai and we are factoring a sharp drop in housing cost," she said.

The financial crisis hit the UAE property sector, particularly in Dubai where rental prices dropped nearly 38 per cent in 2009, according to investment bank HC Securities & Investment (HCSI).

The index covers consumer prices in all of the seven emirates.

Education and the group of alcoholic drinks and tobacco increased most among all the basket categories at 9.51 per cent and 11.14 per cent respectively.

"While alcohol and beverages category has seen the largest increase in prices, its impact on inflation will be limited given the fact that it accounts for less than 1 percent of the basket," she said.

"Increases in education costs will be the main positive contributor to price changes. Housing has the largest weighing accounting for 39.3 per cent of the basket," she added.

The UAE minister of economy, Sultan bin Saeed al Mansouri said on Friday the country's inflation has dropped to 3 per cent in 2009 from more than 12 per cent last year. – Reuters