Saudi Sept inflation eases from 18-month peak

Saudi Sept inflation eases from 18-month peak

Home rents rose 10.5 percent in September from 10.4 percent in August.

October 12, 2010 10:49 by Reuters

A drop in food prices during September pushed inflation in Saudi Arabia slightly off an 18-month peak but home rents continue to rise amid a dearth of housing.

September consumer inflation was 5.9 percent above its level of a year earlier, the government’s statistics department said, against 6.1 percent for August.

This puts inflation in the world’s top oil exporter at the top end of Gulf crude producers but still below record double-digit peaks in 2008.

Month-on-month, the cost of living rose 0.5 percent in September, the same growth it posted in August.

On an annual basis, food prices rose 7.5 percent in September while they were up 8 percent in August, driven mainly by a drop in the annual increase of vegetable prices to 22.8 percent from 28 percent in August.

Home rents rose 10.5 percent in September from 10.4 percent in August, the data showed.

The state-owned National Commercial Bank (NCB) has said inflation in Saudi Arabia will likely remain above 5 percent until the first half of 2011 due mainly to a chronic shortage of low- to medium-level housing.

The implementation of a long-awaited mortgage law may help to reduce pressure on rents by easing financing and boosting housing supply, but it also could stimulate demand, it added.

Muhammad al-Jasser, governor of the Saudi central bank, said last month that inflation was worrying but that he did not plan to change interest rates as it is driven by factors outside the bank’s reach such as surging food prices.

(Reporting by Souhail Karam; editing by John Stonestreet)