Inflation easing in Saudi Arabia, but pressures remain

Inflation easing in Saudi Arabia, but pressures remain
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Published September 13th, 2012 - 08:37 GMT via SyndiGate.info

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Inflation in the Kingdom is easing, but in some areas it is still too high, causing concern for the government
Inflation in the Kingdom is easing, but in some areas it is still too high, causing concern for the government

Saudi Arabia's annual inflation eased to 3.8 percent in August, its lowest level since October 2009, although the monthly increase was the fastest in 10 months

Consumer price growth in the Kingdom has been slowing gradually since peaking at 5.4 percent in February and March, registering 4.0 percent in July.

The month-on-month rate edged up to 0.4 percent in August from 0.3 percent in the previous month, the data from the Central Department of Statistics also showed. Food costs, which account for a quarter of Saudi consumer expenses, rose 0.9 percent in August, the fastest clip in a year, although the annual rate fell to 3.3 percent from 4.0 percent in July.

Monthly growth in rents, one of key factors pushing living costs up in the past years, eased slightly to 0.1 percent in August, which was the smallest rise since December 2007. On an annual basis, rental inflation decelerated to a 14-month low of 8.5 percent from 9.2 percent in July, the data showed, well below rates of over 20 percent in 2009 and 2008.

Last year, the government promised to build half a million new homes to ease a housing shortage after social tensions fed the unrest that rocked much of the Arab world. In July, the government passed a mortgage law to stimulate house building, but analysts believe high land prices may prevent any quick resolution to the problem.

Alturki also said that international food prices will put upward pressure on inflation in the coming months but a gradual decline in renovation and rents will work in the opposite direction.The Saudi central bank said last month that data available at the time indicated relative stability in inflationary pressures in the third quarter of this year.

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