Consumer prices in Bahrain fell 1.3 percent on an annual basis in July, the least in five months, and rose from the previous month helped by a jump in food costs, data showed on Sunday. The small non-OPEC oil producer entered the deflationary path in March, when it went through its worst social unrest since the 1990s, as rents plunged.
Deflation, unseen in the Gulf financial hub since 2002, reached 2.1 percent year-on-year in June after living costs rose by 2.0 percent on average last year.
On the month, consumer prices increased by 0.6 percent in July in their biggest spike since March compared with June's 0.3 percent fall, data from the Central Informatics Organisation showed. "Inflation for the month was very much in line with our expectations. We expect to see some monthly improvement going forward," said Monica Malik, chief economist at EFG-Hermes in Dubai.
Housing costs, which account for nearly a quarter of the basket, remained flat for the fourth month in a row on a monthly basis in July following a 14.2 percent drop in March.
Food prices, which make up for 16 percent of consumer expenses, soared by 2.3 percent from the previous month, which was their sharpest rise in five months, the data showed.
Bahrain's economy shrank by 1.4 percent quarter-on-quarter in the first three months of 2011 as the turmoil hit businesses in the tourism sector, its first quarterly contraction since the global financial crisis in late 2008, data showed last week.