Saudi inflation stays unchanged
Riyadh, July 15, 2014
Saudi Arabia’s inflation rate remained unchanged at 2.7 percent, year-on-year, for the third consecutive month in June, a report said.
Foodstuffs and housing and related services remain the main sources of inflation despite a surprising month-on-month decline in food prices, as core inflation stabilised in June for the second consecutive month, said the Jadwa Investment report quoting data from the Central Department of Statistics and Information (CDSI).
"Our estimate of core inflation, which excludes food and rent and other housing services, remained flat at 2.1 percent year-on-year for the second consecutive month in June. Core inflation was mainly driven by a seasonal increase in the home furniture segment during the summer months (4.9 percent year-on-year), which carries a 9.1 percent weight in the CPI basket," the report said.
Foodstuffs, which account for 21.7 percent of the CPI basket, saw prices rise by 2.8 percent year-on-year in June, adding 0.67 percentage point (pp) to the headline figure. At this level, food index recorded the lowest annual increase since April 2010. This was mainly due to a drop in the monthly food inflation which broke last month’s flat trend and declined, surprisingly, by 0.2 percent compared with May’s print.
Partially offsetting the impact of lower food price inflation was a rebound in rental inflation. It climbed back over 4 percent in June, contributing 1pp, the largest of any component, to headline inflation, the report said.
The increase in this group is being driven by the rent component, which increased 4.6 percent year-on-year in June, compared with 4.2 percent in May. "We think that higher demand during the summer months is putting upward pressure on rents at a time when government initiatives to reform the housing market are still to affect the rental market," it said. - TradeArabia News Service