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Sun 26 Jul 2009 01:53 PM

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Saudi June inflation rate falls after rent costs ease

Saudi annual inflation fell to 5.2 percent in June from 5.5 percent in May.

Saudi annual inflation fell to 5.2 percent in June from 5.5 percent in May after the rate of increase for rent and food prices eased, official data showed on Sunday.

Saudi Arabia's cost of living index was 121.5 points in June, up from 115.5 points in the same month a year ago, state news agency SPA said. The index rose 0.2 percent from May 2009, it added.

The annual rise in rental index -- which includes rents, fuel and water -- eased to 15 percent in June down from 17.7 percent in May, SPA said. For food and beverages it was 1.7 percent, down from 2.4 percent in May.

Inflation in May was 5.5 percent, and 5.2 percent in April.

Before May, inflation rates had been declining rapidly in the largest Arab economy as commodity prices slumped and a stronger US dollar helped reduce import costs for the kingdom, which pegs its riyal to the dollar.

Analysts expect the start of the Muslim fasting month of Ramadan on August 21 to cause a spike in food prices, but retailers are not convinced.

In remarks published on Sunday by al-Watan newspaper, Abdullah al-Othaim, chairman of supermarket chain Abdullah Al-Othaim Markets Co, said food prices during Ramadan would fall by at least 10 percent on average, compared with a year earlier.

Saudi Arabia said last year it would invest around $400bn in the next five years, mainly to enhance infrastructure in the country of around 25 million people.

These projects mean that Saudi Arabia continued to see high housing demand, with an increase in imported labour adding to pressures generated from rapid demographic growth among the native population of over 17 million. (Reuters)

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