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Growing food costs cause higher inflation for Saudi in April

Inflation 4.8 pct y/y in April vs 4.7 pct y/y in March; Consumer prices 0.4 pct m/m vs 0.3 pct m/m in March; Food prices, transport costs rise

May 14, 2011 4:58 by

Saudi Arabia’s annual inflation inched up to 4.8 percent in April due to a rise in food and transport costs, and analysts expect price pressures will grow in the next few months.
Inflation in the world’s top oil exporter had been falling since touching an 18-month high of 6.1 percent in August. It had slowed to 4.7 percent in March.
On a monthly basis, living costs in the biggest Arab economy rose by 0.4 percent in April, up from 0.3 percent in March, the data from the Central Department of Statistics showed.
“Inflation seems to be on a gradual yet increasing path. The downward base effects are now winding up and headline inflation will be more accentuated,” said John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh.
Food prices, which have the largest 26 percent weight in the consumer basket, rose 0.9 percent on a monthly basis, after a 0.1 percent decrease in the previous month.
“Price pressures are now building up and should be reflected in the coming months, especially as we gear up to Ramadan. Rents and food should give upward impetus,” Sfakianakis said.
Food inflation traditionally climbs during the holy month of Ramadan, which this year starts in early August, when families enjoy larger and more elaborate meals after daylight fasting.
Housing and energy costs, which represent 18 percent of the basket, rose by 0.5 percent after a 0.8 percent increase in the previous month.
Analysts polled by Reuters in March expected average inflation of 5.6 percent in 2011.
Saudi’s Central Bank Governor Muhammad al-Jasser said in March handouts by the king to boost wages, create jobs and build houses were not likely to exacerbate inflation.
Worried by spreading unrest across the Gulf region, the government plans to spend nearly 30 percent of the annual economic output to ease social tensions in the kingdom, where over 10 percent of nationals are out of work.
Saudi Arabia, a major U.S. ally and the world’s top oil exporter, is an absolute monarchy that does not tolerate dissent.
Other than scattered Shi’ite protests, the kingdom has not seen the kind of mass uprisings that rocked other parts of the Arab world. (Reporting by Asma Alsharif; editing by Patrick Graham)

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