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Saudi inflation eases to 5.4 per cent

Riyadh, January 8, 2011

Saudi Arabia's annual inflation rate slowed slightly to 5.4 per cent in December, as housing costs and food rose less than in the previous month, state news agency SPA said.

Annual inflation in the biggest Arab economy eased from 5.8pc in November, continuing its decline from an 18-month high of 6.1pc in August.

Monthly inflation in Saudi Arabia stood at 0.1pc in December, down from 0.3pc in the previous month, SPA said.

Housing costs rose 0.4pc month-on-month, compared to a 0.5pc increase in November.

Food prices, which have the largest 26pc weighting in the consumer price basket, rose 0.1pc on a monthly basis in December compared to 0.3pc in the previous month, while transport costs were up 0.1pc.

Analysts expect average inflation of 5pc in 2011, still well below a record high of 11.1pc in July 2008.

The slight decrease in monthly inflationary pressures was expected towards the end of the year, analysts said, due to a decline in rental pressures.

"We will continue to see similar scenarios with small additional declines in rental inflation and food prices keeping their robustness due to higher global food prices," said Banque Saudi Fransi chief economist John Sfakianakis.

Saudi Arabia's economy is seen expanding by 4.3pc this year, helped by a recovery in crude prices and generous government spending.

In December, Saudi unveiled an expansionary budget, with plans to spend SR580 billion ($154.7 billion) this year, mainly on education and infrastructure projects.-Reuters




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