Housing, Utilities and Fuel Drive Inflation Index in Saudi Arabia

People shop at a supermarket in Saudi Arabia. (Asharq Al-Awsat)
People shop at a supermarket in Saudi Arabia. (Asharq Al-Awsat)
TT
20

Housing, Utilities and Fuel Drive Inflation Index in Saudi Arabia

People shop at a supermarket in Saudi Arabia. (Asharq Al-Awsat)
People shop at a supermarket in Saudi Arabia. (Asharq Al-Awsat)

Saudi Arabia’s inflation rate increased to 2% in November, the highest in 15 months. The rise was driven primarily by a 9.1% increase in housing, water, electricity, gas, and other fuel prices, alongside a 2.7% rise in prices for miscellaneous goods and personal services. In contrast, transportation costs fell by 2.5%.

Despite the increase, Saudi Arabia remains the G20 nation with the lowest inflation rate, a level economists describe as relatively moderate.

According to the Consumer Price Index report published by the General Authority for Statistics (GASTAT) on Sunday, the housing, water, electricity, gas, and other fuel category saw a 9.1% rise, which was mainly due to a 10.8% surge in residential rents.

Housing costs significantly influenced overall inflation, as this category accounts for 25.5% of the consumer basket. Similarly, prices for miscellaneous goods and personal services rose by 2.7%, driven by a 23.7% increase in the prices of jewelry, watches and antiques.

The restaurants and hotels category also experienced a 1.5% rise, fueled by a 5.9% increase in hotel and furnished apartment service costs. Meanwhile, education expenses increased by 1.1%, reflecting a 1.8% rise in tuition fees for middle and secondary schools.

Food and beverage prices rose slightly by 0.3%, primarily due to a 1.9% increase in the cost of meat and poultry.

Dr. Naif Al-Ghaith, Chief Economist at Riyad Bank, linked the 2% year-on-year inflation increase to economic shifts under Vision 2030, which aims to diversify Saudi Arabia’s economy and reduce reliance on oil.

According to Al-Ghaith, the housing and utilities sector was the primary contributor to inflation, with residential rent prices, particularly for apartments, increasing by 12.5%.

Moreover, the 2.7% increase in miscellaneous goods and personal services reflects changes in consumption patterns and rising demand for certain goods and services amid Saudi Arabia’s ongoing economic and social transformation.

In contrast, the transportation sector’s 2.5% decline helped offset inflationary pressures. Al-Ghaith attributed this decrease to improvements in transportation infrastructure and enhanced logistics efficiency, aligning with Vision 2030’s objectives to modernize the transport and logistics sectors.

Al-Ghaith noted that these inflationary changes are part of the Kingdom’s broader economic transformation. For instance, rising housing costs may indicate increased investment in real estate and improved living standards. Similarly, higher prices for personal goods and services reflect the economy’s diversification and the emergence of new industries.



Transatlantic Airfares Slump as Western Europeans Skip US Travel 

A view of Leonardo da Vinci International Airport in Fiumicino, near Rome, Italy, September 23, 2024. (Reuters) 
A view of Leonardo da Vinci International Airport in Fiumicino, near Rome, Italy, September 23, 2024. (Reuters) 
TT
20

Transatlantic Airfares Slump as Western Europeans Skip US Travel 

A view of Leonardo da Vinci International Airport in Fiumicino, near Rome, Italy, September 23, 2024. (Reuters) 
A view of Leonardo da Vinci International Airport in Fiumicino, near Rome, Italy, September 23, 2024. (Reuters) 

Airfares from Europe to the United States have dropped to rates not seen since before the pandemic, as travelers from Western Europe lead a pullback in travel to the US that is expected to continue through at least July.

Overseas arrivals to the United States fell 2.8% in May from a year ago, according to preliminary data from the US National Travel and Tourism Office within the US Department of Commerce.

Travel from Western Europe fell 4.4% in May although travel from Eastern Europe rose 4.6% in the same period.

Forward bookings suggest sustained declines are on the horizon, with total inbound bookings to the US in July down 13% year-over-year, according to OAG Aviation, an analytics firm.

Transatlantic airfare has been declining since the first quarter when Europeans started reconsidering travel to the US after President Donald Trump suggested annexing Greenland, launched a global trade war, and issued orders that focus on stricter border policy. A stronger dollar has also deterred some trips.

In March, travel from Western Europe fell 17% year-over-year, according to the NTTO.

Average round-trip economy airfares for over 50 routes from the US to Europe in the first quarter were down an average of 7% year-over-year, with rates to fly between Atlanta, Georgia, and London, down 55%, according to data from Cirium, an aviation analytics firm.

As American consumers have been bargain-hunting and waiting closer to their departure dates to finalize travel plans, the decline in demand from Europe is another factor contributing to cheaper travel.

"Fewer seats filled by European travelers to the US, and a slower pace of growth in US outbound to Europe than last year, will tend to cast 2025 as a tougher year to make money on transatlantic routes," said Aran Ryan, director of industry studies at Tourism Economics, a subsidiary of Oxford Economics.

This summer, the price of round-trip tickets from the US to Europe is down 10% compared with a year ago, travel booking app Hopper said. Average fares of $817 per ticket are in line with prices to Europe in the summer of 2019 before the pandemic.

Major carriers, including Air France KLM and Germany-based Lufthansa, expect slowing activity.

Lufthansa CEO Carsten Spohr said the company expects weaker demand in the third quarter, while Air France KLM CEO Ben Smith said the company is seeing a "slight pullback" in transatlantic traffic and will slash prices to keep cabins on its transatlantic flights full.

Airlines including Lufthansa and US air carrier United Airlines say higher demand from US travelers flying to Europe is offsetting the decline of Europeans flying the opposite direction.

United said international bookings from Europe fell 6% in the first quarter, but added that US-originating demand made up for the pullback. Rival Delta Air Lines said 80% of its long-haul international demand originates from the US, and fares in the region are "significantly higher" than in the rest of the world.

Lufthansa said it plans to market its transatlantic flights to more Americans given the higher demand, despite travel from Western Europe showing moments of recovery. Travel from the region to the US increased 12.1% in April before falling again in May, according to data from the NTTO.

As of mid-May, there are 4.3% more international flights scheduled to depart from US airports for international destinations this summer, said Hopper.

"We feel really good about the transatlantic market," American Airlines CFO Devon May said at a Wolfe Research transportation and industrials conference in May.