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)
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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.



Dollar Hovers as Investors Focus on Israel-Iran Conflict ahead of Fed Decision

US dollar banknotes are seen in this photo illustration taken February 12, 2018. REUTERS/Jose Luis Gonzalez/Illustration/File Photo
US dollar banknotes are seen in this photo illustration taken February 12, 2018. REUTERS/Jose Luis Gonzalez/Illustration/File Photo
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Dollar Hovers as Investors Focus on Israel-Iran Conflict ahead of Fed Decision

US dollar banknotes are seen in this photo illustration taken February 12, 2018. REUTERS/Jose Luis Gonzalez/Illustration/File Photo
US dollar banknotes are seen in this photo illustration taken February 12, 2018. REUTERS/Jose Luis Gonzalez/Illustration/File Photo

The US dollar dipped against the yen and steadied against the Swiss franc on Wednesday, as fighting between Israel and Iran prompted investors to scoop up safe havens, while a Federal Reserve decision later on rates kept volatility subdued.

Israel has bombarded arch-enemy Iran over the past six days to halt its nuclear activity and has asserted the need for a change of government in the Islamic Republic.

The US military is also bolstering its presence in the region, Reuters reported, stirring speculation about US intervention that investors fear could widen the conflict in an area with critical energy resources, supply chains and infrastructure.

Iranian Supreme Leader Ali Khamenei said in a statement read by a state television presenter on Wednesday that his country would not accept US President Donald Trump's call for an unconditional surrender.

The dollar has resumed its role as a safe haven, having gained around 1% against both the Japanese yen and Swiss franc since last Thursday. On Wednesday, theurrency took a breather, edging fractionally lower against the yen and the franc and more noticeably so against the euro and the pound.

"The dollar is still a safe haven because of its depth and liquidity, so, yes, the structural forces are diluting the dollar safe-haven activities, but they're not eroding them completely," said currency strategist Rodrigo Catril at National Australia Bank.

"But in a scenario of big risk aversion, the dollar will still gain support, but maybe not to the same extent it has managed in the past."

Against a basket of six other major currencies, the dollar is still down around 8% so far this year, as confidence in the US economy and the reliability of Trump's administration as a trading and diplomatic partner has faded.

With the Fed's decision on interest rates just hours away and US markets closed on Thursday for the Juneteenth federal holiday, activity in currencies was muted.

Against the yen, the dollar fell 0.3% to 144.845 and was steady against the franc at 0.8175 francs.