Oman's inflation eased slightly in July, after hitting a 13 month high the previous month, while its foreign trade surplus swelled to a two year high in April on hydrocarbon exports, data showed on Monday.
Price pressures in the Gulf Arab oil producer have been building up this year, mainly on rising food and housing costs, while higher crude prices helped its trade balance improve.
Consumer inflation decelerated to 3.3 percent year on year in July, from 3.5 percent in June, data from the economy ministry showed, but analysts see it creeping higher again in coming months.
Inflation has fallen sharply from a record high 13.7 percent in June 2008.
Prices edged down 0.1 percent month on month in July, for their first monthly decline since March, helped by slower growth in food prices and housing costs combined with falls in clothing and personal care items.
Simon Williams, chief economist at HSBC Bank in Dubai, said: "I don't see this as the start of a downward trend."
He added: "In fact, I'm looking for prices to pick up from August onwards and expect inflation to be running at over 4 percent by year end as (the) recovery continues to gain traction."
Food inflation traditionally climbs during the holy month of Ramadan, which ended in mid September, when families enjoy larger and more elaborate evening meals after daylight fasting.
The sultanate's central bank warned in July that it needed to closely watch inflation in the second half as it could put the currency under pressure.
Total credit in the non OPEC oil producer rose 6.4 percent in July, the fastest pace in five months, but still well below double digit rates seen in the first half of 2009, the data also showed. Money supply growth also stayed in single digits.
Separately, Oman's foreign trade surplus surged to a two year high of 620 million rials ($1.6 billion) in April with exports up 72 percent from a year ago, mainly on higher hydrocarbon exports. Import growth slowed significantly to 11.9 percent, the data showed.
Williams said: "Oil prices have recovered in 2010 and will remain firm to year end, export earnings will therefore be significantly up on 2009."
Last year, the global crisis slashed oil output in Gulf Arab oil producing nations, trimming economic growth rates in Saudi Arabia and the UAE, the biggest oil exporters in the region.
Much smaller Oman was less affected because as a non-OPEC member it did not have to join the cartel's output cuts.
Crude exports accounted for more than 67 percent of Oman's overall exports in April, the data showed. Benchmark US crude oil prices remain strong, topping $74 a barrel on Monday.
Analysts polled by Reuters forecast inflation in Oman will average 3.5 percent this year and the country will post a current account surplus of 3.0 percent of gross domestic product. (Reuters)
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