Riyadh - Mubasher: The Saudi General Authority for Statistics (GAS) has released Consumer Price Index data for July, showing a deceleration in prices to 3.8% year-on-year compared to 4.1% in June, according to a recent report by Jadwa Investment.
Food inflation turned negative for the first time since January 2010, while housing inflation remained as the main contributor to overall inflation during July, the report added.
The contribution of housing prices to overall inflation rose to 49.4%, its highest level since December 2011, while core inflation saw its contribution decline to 51%, down from 53.6% recorded in the previous month.
Jadwa believes that subdued economic activity amidst negative growth in broad money supply has contributed to the recent slowdown in the core index.
“It appears that persistent deflation in international food prices have finally set into domestic foodstuffs,” it added.
While external factors’ contribution to inflation will remain subdued, particularly due to a stronger US Dollar and weaker global economic growth, Jadwa expects domestic inflationary pressure to be subdued for the remainder of 2016.
“Domestic price pressures should be alleviated by the negative growth in broad money supply (M3), which is in part due to falling bank deposits,” stated the report.
Jadwa said it maintains its view that housing inflation will remain the main contributor towards overall inflation, with the increase being driven by strong domestic demand for housing units.
“The combination of these factors leads us to maintain our forecast for an average annual inflation rate at 3.9 percent for 2016,” the report concluded.
