Saudi inflation down for 4th month

Inflation in Saudi Arabia reversed a steady rise for many months and declined in June for the fourth consecutive month this year, driven by falling core inflation and food prices, an investment company in the Gulf Kingdom said on Monday.

Inflation in the world’s largest oil exporter eased to 3.5 percent in June compared with 3.8 percent in May, the Riyadh-based  Jadwa Investment said in a study.

“The decline was pushed down by falling core inflation and food prices while rent and housing-related services component remained flat,” it said.

But the study, sent to Emirates 24/7, expected food prices to increase in July due to the strong demand in the fasting month of Ramadan while strong housing demand will keep the upside risk to rental inflation.

“While domestic inflationary pressure is likely to persist as we approach the holiday seasons, we see the current inflationary trend as more of a demand-pull inflation rather than a cost-push inflation caused by recent labor market reforms,” it said.

On a monthly basis, prices slightly increased by 0.2 percent compared with 0.1 percent in May, Jadwa said, adding that core inflation, which excludes food, rents and housing-related services, “maintained its downward trend for the fourth consecutive month.”

Its figures showed the rate fell to 2.2 percent year-on-year in June compared with 2.6 percent in May. The report said core inflation was mainly driven by the restaurant and hotel group (4.4 percent year-on-year) followed by furnishings, household equipment and maintenance (2.8 percent year-on-year).

“With core inflation falling, the contribution of food, rents and housing-related services groups to the overall inflation increased to around 66 percent compared with nearly 64 percent in the previous month,” the report said.

But it added that food inflation slowed to 6.1 percent year-on-year (0.1 percent month-on-month) in June compared with 6.4 percent (0.2 percent month-on-month) in May.

The report said that despite the decrease in food inflation in June, it remained high by historical standards and the largest single contributor to overall inflation in the Kingdom, adding around 1.4 percentage point.” We expect food prices to reverse the trend and rise in July in line with the trend ahead of Ramadan.”

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