The month of July saw a contraction in the UAE's M1 money supply, which includes currency in circulation and monetary deposits. This clearly reflected a plunge in consumer spending.

In the month of July, M1 sank 13.5% to AED217 billion (US$59.1 billion). As per the data on the UAE central bank website, the pace of decline was higher than the 10.7% fall in June.

A July hike to 6.4% from June's 6.2% was seen in M2 money supply growth, which includes deposits in foreign currencies and long-term savings accounts; while an increase was noticed in M3 money supply, which also takes into account government deposits, by 14.3% in July, compared with 13.5% the previous month.

If the separate figures from the central bank are considered then UAE's bank lending plunged 0.2% in July from the previous month, while deposits rose 0.2%.

The month of July also witnessed an increase in specific provisions taken by banks by 5.9% in July to AED25.3 billion, the highest amount in 11 months of data posted by the central bank.

A decline was also noticed in general provisions taken by banks by 13.5% in July to AED8.3 billion.

Last week, the central bank governor said: "The UAE economy will see strong economic growth in 2010, recovering from a contraction in 2009, boosted by an expected rally in oil prices."