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Saudi Housing Rents Propel Inflation to 1.8% in February

Intensive efforts to control the inflation rate in Saudi Arabia (Asharq Al-Awsat)
Intensive efforts to control the inflation rate in Saudi Arabia (Asharq Al-Awsat)
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Saudi Housing Rents Propel Inflation to 1.8% in February

Intensive efforts to control the inflation rate in Saudi Arabia (Asharq Al-Awsat)
Intensive efforts to control the inflation rate in Saudi Arabia (Asharq Al-Awsat)

Saudi Arabia’s annual inflation rate rose to 1.8% in February from 1.6% the previous month driven by increases in housing rents.

Despite this uptick, inflation has remained relatively low in Saudi Arabia compared to global levels, with government policies limiting the impact of international price increases.

The Kingdom recently ranked second among G20 countries with the lowest inflation rates, after Switzerland, which registered 1.3%.

The rise in inflation in February was driven by pressures from housing, water, electricity, gas prices, and other fuel types, which increased by 8.5%, and food and beverage prices by 1.3%.

Conversely, transportation prices decreased by 0.9%, as did various personal goods and services by 1.1%.

According to the latest Consumer Price Index report for February 2024 released by the General Authority for Statistics (GASTAT) on Thursday, housing rents soared by 10% annually, driven by a 9.1% spike in villa rents, significantly impacting overall inflation.

Experts believe Saudi Arabia is managing inflation well compared to other economies. They suggest continued investment in housing projects to lower property prices and rents, thus reducing inflation.

Shura Council member Fadhel Al-Buainain clarified to Asharq Al-Awsat that consumer spending is directly affected by price hikes, reducing purchasing operations and negatively impacting markets, extending beyond consumers to affect the retail sector and other sectors, limiting their expansion and sustainability as well.

According to Al-Buainain, among the tools contributing to reducing the inflation rate is providing goods and products exceeding market demand, achievable through three main axes: stimulating national production to meet the majority of local needs, regulating prices, and exerting more pressure on them in the case of fair competition among producers and avoiding monopolies.

Additionally, encouraging development companies to build more affordable housing could help ease the cost of living.

Overall, efforts to stabilize housing costs and stimulate production are expected to keep inflation in check in Saudi Arabia.

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Saudi Arabia Sees Highest Level of Non-oil Private Sector Activity in 4 Months

The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)
The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)
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Saudi Arabia Sees Highest Level of Non-oil Private Sector Activity in 4 Months

The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)
The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)

Business activity in Saudi Arabia's non-oil sector accelerated to a four-month high in September, driven by strong demand, which led to faster growth in new orders. The Riyad Bank Saudi Arabia Purchasing Managers' Index (PMI), adjusted for seasonal factors, rose to 56.3 points from 54.8 in August, marking the highest reading since May and further distancing itself from the 50.0 level that indicates growth.

The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders, alongside challenges in supply. The improvement in business conditions contributed to a significant rise in employment opportunities, although difficulties in finding skilled workers led to a shortage in production capacity.

At the same time, concerns over increasing competition caused a decline in future output expectations. According to the PMI statement, inventories of production inputs remained in good condition, which encouraged some companies to reduce their purchasing efforts.

Growth was strong overall and widespread across all non-oil sectors under study. Dr. Naif Al-Ghaith, Senior Economist at Riyad Bank, said that the rise in Saudi Arabia's PMI points to a notable acceleration in the growth of the non-oil private sector, primarily driven by increased production and new orders, reflecting the sector’s expansionary activity.

Al-Ghaith added that companies responded to the rise in domestic demand, which plays a crucial role in reducing the Kingdom's reliance on oil revenues. The upward trend also indicates improved business confidence, pointing to a healthy environment for increased investment, job creation, and overall economic stability.

He emphasized that this growth in the non-oil sector is particularly important given the current context of reduced oil production and falling global oil prices. With oil revenues under pressure, the strong performance of the non-oil private sector acts as a buffer, helping mitigate the potential impact on the country's economic conditions.

Al-Ghaith continued, noting that diversifying income sources is essential to maintaining growth amid the volatility of oil markets. He explained that increased production levels not only enhance the competitiveness of Saudi companies but also encourage developments aimed at expanding the private sector's participation in the economy.

This shift, he said, provides a more stable foundation for long-term growth, making the economy less susceptible to oil price fluctuations.