Economy Non-oil discounting brings Saudi inflation down By Andrew Hammond July 16, 2024, 12:39 PM Unsplash+/Getty Clothing and footwear prices in Saudi Arabia were down 3.2 percent year on year in June, and 0.2 percent month on month Saudi CPI down to 1.5% Wholesale index at high of 3.2% ‘Brisk’ rent rises of more than 10% Saudi Arabia’s year-on-year consumer inflation rate fell to a low of 1.5 percent as non-oil businesses competed over prices but the wholesale price index remained at a high of 3.2 percent, reflecting high prices globally. The consumer price index was down from 2.7 percent in June 2023. The CPI was also down from the 1.6 percent rate at which it stood in March, April and May this year. Rent rises of 10.1 percent contributed significantly to the CPI rate, and there was a 2.4 percent annual increase in restaurant and hotel prices. NewsletterGet the Best of AGBI delivered straight to your inbox every week Prices for clothing and footwear, furnishings and household equipment, tobacco, recreation and transport were all down. The detailed breakdown showed a 22.5 percent increase since May in furnished apartment prices and 20.4 percent in hotel accommodation, the General Authority for Statistics said. Real estate consultancy Knight Frank said in a report this month that Riyadh retail rents rose 3 percent over the past year, and are predicted to rise by 28 percent by 2026. But rents fell by 7 percent in Jeddah and 1.3 percent in Dammam. The International Monetary Fund’s last Saudi bulletin in June pointed to the rental market as a cause of inflation and cited the high wholesale price index. “Rents are growing at a brisk rate of about 10 percent amid inflows of expatriate workers and large redevelopment plans in Riyadh and Jeddah,” it said. “Wholesale prices have also edged up recently, reflecting an increase in input costs. So far, some uptick has been observed in the wages of high-skilled workers.” The consumer index is based on endpoint prices of 490 goods and services based on a 2018 survey of household spending, while the wholesale index has used the pre-retail prices of 343 items since 2014. The wholesale rises were associated with an 8 percent rise in transportable goods, including a 13.4 percent rise in base chemicals and 11.9 percent in refined petroleum products, and increases in a range of construction materials such as red sand, up 18.5 percent. Saudi Arabia is experiencing a surge in construction as it pushes to finish giga-projects estimated at more than $1.25 trillion, but GDP has suffered as a result of a policy of oil output cuts in an effort to push up world oil prices and state revenues. Expat remittances from Saudi rise 12% to $3.4bn UAE economic growth brings rise in court disputes, say lawyers FDI into Morocco up 20% after business-friendly reforms The IMF forecasts inflation at 1.9 percent over the year but lower oil prices could lead the budget deficit to reach 3 percent of GDP. Riyad Bank, which publishes the Saudi Purchasing Managers’ Index with S&P Global, said in its July report that inflation was low because non-oil businesses are lowering prices to win market share. “The need to pass on cost increases continued to be offset by discounting efforts amid strong competition,” it said, adding that this was “despite overall input prices rising at their fastest pace in four months”.
