Saudi inflation slowed to a 16-month low of 4.6 percent on an annual basis in May, mainly due to a monthly drop in food costs, though analysts warned prices were likely to rise ahead of the holy month of Ramazan. Price growth was unchanged at 0.4 percent on a monthly basis in May, data from the Central Department of Statistics showed.
Analysts however see price pressures growing in the next month mostly due to the traditional pressure on food costs during Ramazan, which starts in August, when families enjoy larger and more elaborate meals after daylight fasting. "I was expecting that there will be a slow but gradual increase and that for this month you would see an increase in inflation year-on-year, so it is a bit of a surprise," said John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh.
Saudi inflation hit 5.1 percent in 2009, after a record high of 9.9 percent in the oil-boom year of 2008, well above its long-term average of around 1 percent. Worried by unrest sweeping the Arab world, the world's top oil exporter has pledged to spend an estimated $130 billion, or around 30 percent of its annual economic output, on new houses, creating jobs, unemployment benefit and other measures.
Central Bank Governor Muhammad al-Jasser said in June the economy could grow around 6 percent this year rather than the 4.3 percent currently estimated thanks to a recently unveiled social spending package. The central bank also said it expected moderate inflationary pressures in the Gulf oil producer in the second quarter of 2011.
Food prices, which have the largest weighting, 26 percent, in the consumer basket, fell 0.3 percent on a monthly basis in May after a 0.9 percent rise in the previous month. Housing costs, which account for 18 percent in the basket, rose slightly by 0.6 percent in May compared to a 0.5 percent increase in April. Transport prices were up 0.1 percent month-on-month in May versus a 0.3 percent rise in the previous month.
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