High food prices add to Saudi inflation

Inflation in Saudi Arabia has accelerated to 4.2 percent year-on-year in January this year, the highest level since July 2012, compared with 3.9 percent the previous month, according to the latest report by the Central Department for Statistics and Information (CDSI).
The Riyadh-based Jadwa Investment said rise is mostly due to higher food and other expenses and services prices which both contributed 2.3 percentage point to the overall inflation figure, while the contribution of rent and housing related services inflation fell to 1.2 percentage point in January compared with 1.5 percentage point in the previous month.
“Our measure of core inflation has also accelerated to 2.7 percent in January compared with 2.1 percent in December,” the Jadwa report said
Food prices maintained their upward trend since September last year. In January, food prices increased by 6 percent year-on-year, the highest level since April 2011. Most of this increase is due to risings prices of meat and poultry, fish and crustaceans and fresh fruits. Prices of cereal and cereal products, however, maintained their deflationary trend, contracting by 0.3 percent year-on-year despite some reports of grain and flour shortage in some areas of the Kingdom. In fact, the General Organization for Grain Silos and Flour Mills has announced that it raised the flour allocation to licensed distributors by 10 percent earlier this month. International food prices also point to a minimal external pressure. According to the Food and Agriculture Organization (FAO), international food prices contracted by 1.4 percent year-on-year in January compared with –0.4 in December, the report said.
Rent and housing related services inflation decelerated to 5.1 percent year-on-year, the lowest level since April 2007. While we had anticipated a gradual decline in this category due to additional housing units entering the market, a larger base effect has also played a role in this accelerated decline. The month-on-month change (0.5 percent) is consistent with last year trend, though it was slightly higher than December level (0.4 percent).
Monthly inflation slightly increased to 0.3 percent in January compared with 0.2 percent in December. Transport and telecommunication posted the highest increase, 0.6 percent which mostly due to a 1.5 percent month-on-month increase in public transport fees. This along with a 0.4 percent rise in the prices of other goods and services pushed the monthly core inflation upward to 0.3 percent compared with 0.1 percent in December. Monthly food inflation remained at the December level of 0.2 percent, the Jadwa report said.