Food inflation turned negative in Saudi Arabia in July for the first time since the start of 2010, according to new official figures analysed by Jadwa Investment.
Consumer price index data for July showed a deceleration in prices to 3.8 percent year-on-year compared to 4.1 percent in June, the four consecutive month of declines.
Jadwa said in a statement that the decline was, in part, the result of the subdued level of economic activity so far in 2016.
It added that it maintains its forecast for annual average inflation of 3.9 percent for 2016.
While food inflation turned negative for the first time in more than six years, housing inflation remained as the main contributor to overall inflation during July.
The contribution of housing prices to overall inflation rose to 49.4 percent, its highest since December 2011, while core inflation saw its contribution decline to 51 percent, down from 53.6 percent recorded in the previous month. Jadwa said.
"It appears that persistent deflation in international food prices have finally set into domestic foodstuffs. We believe that the recent move by authorities to facilitate imports of food products from various destinations has had a significant impact on domestic foodstuffs, which have turned negative, year-on-year," it added.
Housing inflation recorded an acceleration in July to 7.5 percent, up from 7.2 percent in June as rentals rose to 3.4 percent year-on-year in July, up from 2.9 percent recorded in the previous month.
"While this still reflects elevated demand for rentals amidst a shortage of housing units, it is lower than the same period last year," said Jadwa.
Nearly all subgroups of the core index posted a year-on-year slowdown in July. Year-on-year inflation for clothing, transport, and furnishings slowed to 4.2 percent, 9.4 percent, and 2 percent respectively. Meanwhile the year-on-year deflationary trend in the restaurants and hotels subgroup continued with -1.6 percent in July.For all the latest GCC news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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