Saudi inflation rebounds from 28-month low
Riyadh, December 29, 2009
Saudi Arabia's annual inflation climbed to 4 per cent last month from October's 28-month low on rising home rents and import costs, nearing the government's full year forecast, official data showed on Tuesday.
The global financial crisis trimmed inflation rates across the Gulf Arab region from last year's record peaks, with some countries such as the UAE experiencing deflation.
But price pressures are seen rising again as key players in the world's top oil exporting region recover from this year's downturn.
The kingdom's cost of living index stood at 124.7 points in November, up from 119.9 points a year earlier, data from the official statistics authority showed. Annual inflation reached 3.5 per cent in October, its lowest level since June, 2007.
On the month, consumer prices rose 0.3 per cent in November, after increasing by 0.7 per cent in October.
'The rise is a combination of imported inflation, mainly higher costs of foodstuffs as well as the usual (home rents) domestic inflation suspects.It could indicate a pick up in domestic demand,' said John Sfakianakis, chief economist at Banque Saudi Fransi, Calyon's Saudi affiliate.
Analysts were expecting inflation to rebound from its October level mainly due to a chronic housing shortage and a weaker U.S. dollar, which raises the cost of imports.
'We had expected inflation to bottom out in October and going forward we expect the inflation rate to rise driven by food, other costs and rents as economic activity picks up,' said Monica Malik, chief economist at EFG-Hermes in Dubai.
The government has estimated annual inflation to reach 4.4 per cent on average in 2009, below a record high of 9.9 per cent last year but above an average 2.3 per cent seen in the previous three years.
Home rents recorded an annual rise of 14.1 per cent in November, down from an increase of 14.3 per cent in October. The food price index fell 0.1 per cent on an annual basis in November, after a 0.3 per cent decline in the previous month.
The most significant increase came from miscellaneous goods and services -- which include imported personal hygiene goods -- whose annual rise almost doubled to 9.5 per cent in November from 4.9 per cent in October.
The central bank has said the general trend indicates a continued decline in inflation during the fourth quarter of 2009 but noted inflationary pressures were likely during the period although these will be mostly due to seasonal factors.
The dollar, to which Saudi Arabia pegs the riyal, had been under downward pressure in recent months, which could boost the cost of imports for the world's biggest oil exporter, a major importer of food products.-Reuters