The cost of living index in June reached 134.2 points
against 133.7 in May, registering a 0.4 percent rise.
The higher index in June is attributed to the rise in the
prices of four major components — maintenance, rental, fuel and water by 1
percent, food and drinks 0.5 percent, household furniture 0.3 percent and
education and entertainment 0.1 percent.
On the other hand, cost of clothes, shoes, medical care,
transportation and telecommunication and other commodities and services
remained unchanged.
Commenting on the report, John Sfakianakis, chief economist
at Banque Saudi Fransi, said: "Inflationary pressures are very gradually
creeping up in the Gulf but overall the increases we are witnessing are benign
and measured. In Saudi Arabia the increase in the month of June is very small
on a year-on-year basis and still moderate on a month-on-month basis, although
we'll see headline inflation increasing in Saudi Arabia due to higher food
prices as the holy month of Ramadan is nearing."
He said the inflationary impact from Custodian of the Two
Holy Mosques King Abdullah's extra spending program has had a limited pass
through effect. Average inflation for the year is still less than last year's
5.3 percent.
Jarmo T. Kotilaine, chief economist at the National
Commercial Bank, said: "The latest numbers point to a slight
intensification of inflationary pressures in the region, marking a reversal of
some of the moderation seen of late. The sources of price pressures remain the
usual combination of housing and food. Little immediate relief is likely in
either area, although the loss of market momentum due to the expiry of QE2 and
some better news on corn sowing, etc. is containing the upward pressures
somewhat."
However, Kotilaine said the boost to disposable incomes from
additional bonuses, as well as the government's ambitious spending plans will
act as countervailing forces. Although massive funding has been allocated to
housing, this will translate into new supply only gradually, over a number of
years, he said. Rental pressures look likely to persist even though the effects
of the new labor market measure may reduce the market pressure in some areas,
he added, claiming in general, the inflation outlook is becoming fairly mixed.
