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.



Oil Inches Up on Supply Concerns and Weaker Dollar

FILE PHOTO: Pump jacks pump oil at an oil field on the shores of the Caspian Sea in Baku, Azerbaijan, October 5, 2017. Picture taken October 5, 2017. REUTERS/Grigory Dukor/File Photo
FILE PHOTO: Pump jacks pump oil at an oil field on the shores of the Caspian Sea in Baku, Azerbaijan, October 5, 2017. Picture taken October 5, 2017. REUTERS/Grigory Dukor/File Photo
TT
20

Oil Inches Up on Supply Concerns and Weaker Dollar

FILE PHOTO: Pump jacks pump oil at an oil field on the shores of the Caspian Sea in Baku, Azerbaijan, October 5, 2017. Picture taken October 5, 2017. REUTERS/Grigory Dukor/File Photo
FILE PHOTO: Pump jacks pump oil at an oil field on the shores of the Caspian Sea in Baku, Azerbaijan, October 5, 2017. Picture taken October 5, 2017. REUTERS/Grigory Dukor/File Photo

Oil prices ticked up on Tuesday on concerns about supply, with Iran set to reject a US nuclear deal proposal that would be key to easing sanctions on the major oil producer, while weakness in the dollar also supported prices.

Brent crude futures gained 21 cents, or 0.32%, to $64.84 a barrel by 0437 GMT. US West Texas Intermediate crude was up 27 cents, or 0.43%, to $62.79 a barrel, after rising about 1% earlier in the session.

The oil market surged higher on Monday as rising geopolitical risks and a supply hike from OPEC+ that fell short of expectations provided a boost, said ING analysts in a note.

"The strength continued into early morning trading today," ING said on Tuesday.

Both contracts gained nearly 3% in the previous session after the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, agreed to keep output increases in July at 411,000 barrels per day, which was less than some in the market had feared and the same hike as the previous two months.

"With the worst fears not panning out, investors unwound their bearish positions they had built prior to the weekend’s meeting," ANZ analysts said in a note.

Meanwhile, the dollar index, which measures its performance against six other major currencies, held near six-week lows as markets weighed the outlook for President Donald Trump's tariff policy and its potential to hurt growth and stoke inflation.

A weaker US currency makes dollar-priced commodities such as oil less expensive for holders of other currencies.

"Crude oil prices continue to rise, supported by the weakening dollar," said Priyanka Sachdeva, senior market analyst at Phillip Nova.

Geopolitical tensions also supported prices. Iran was poised to reject a US proposal to end a decades-old nuclear dispute, an Iranian diplomat said on Monday, saying it fails to address Tehran's interests or soften Washington's stance on uranium enrichment.

If nuclear talks between the US and Iran fail, it could mean continued sanctions on Iran, which would limit Iranian supply and be supportive of oil prices.

Adding to supply worries, a wildfire in the province of Alberta in Canada has prompted a temporary shutdown of some oil and gas production, which could reduce supply.

According to Reuters calculations, wildfires in Canada have affected more than 344,000 bpd of oil sands production, or about 7% of the country's overall crude oil output.