Saudi Inflation Accelerates to Record 10.6% in June
Saudi Arabian inflation accelerated to a record 10.6 percent in June from 10.4 percent in May, led by a jump in food and housing costs, Saudi Press Agency reported.
Food and beverage prices rose 16 percent in June from a year earlier after gaining 15 percent in May, the state-owned news wire said today. Rent, fuel and water was 19 percent more expensive.
Inflation accelerated above 10 percent in five of the six Gulf Cooperation Council states as oil-fueled economic growth created shortages of housing and services. The weaker dollar and higher global food costs also made imports more expensive. All GCC countries except Kuwait peg their currencies to the dollar.
“Saudi inflation is still going to be rent and food driven for the rest of the year,'' said Monica Malik, chief economist at EFG-Hermes Holding SAE, Egypt's largest investment bank by market value in a telephone interview from Dubai. “We expect some stabilization in food prices'' toward the end of the year.
Saudi Arabia has raised the reserve requirement for banks in an attempt to slow money supply and lending growth, which have accelerated as the central bank cut interest rates to keep its peg to the dollar.
The kingdom's M1 money-supply growth, a gauge of future inflation, accelerated to 29 percent in June from 27 percent in May http://payday-nofax.com. Saudi commercial bank lending to the private sector, a contributor to money supply, increased 35 percent, after gaining 33 percent in May.
Inflation has been accelerating since the middle of last year, when the rate was at around 3 percent. It has been just over 10 percent in the past three months.
Easing Pressure
“The rate of inflation growth has been slower in the last two months, which makes me optimistic that price pressure are easing,'' said John Sfakianakis, chief economist at Saudi British Bank, the Riyadh-based lender 40 percent owned by HSBC Holding Plc, in a telephone interview from Riyadh today.
The GCC is an economic and political grouping of Saudi Arabia, the U.A.E., Kuwait, Qatar, Oman and Bahrain.
Qatar had the highest inflation in the GCC, at 14.8 percent in the first quarter, followed by 13.2 percent in Oman. The U.A.E., which reports inflation annually, said consumer prices rose 11.1 percent last year.
Kuwait reported that the inflation rate fell to 11.1 percent in May from 11.4 percent in April.