Editor’s Note:
Last month the Saudi Arabian Monetary Agency (SAMA) released its quarterly inflation report which provided a comprehensive review of the economic situation in the Kingdom. The report noted that the latest IMF data for June 2011 suggested global economic activity was witnessing a temporary slowdown, and the global inflation is accelerating at a higher than expected pace due to the increases in food and fuel consumption, especially in emerging and developing economies. The IMF report, released in July, showed an increase in the prices of non-oil commodities by 28.0 percent when comparing the second quarter of 2011 with the corresponding quarter of 2010, and noted world food prices rose by 33.1 percent.
Today Riyadh-based Jadwa Investment circulated its monthly Inflation Report which noted the year-on-year rate eased from 4.9 percent in July to 4.8 percent in August, and it provides analysis of inflation stats and trends. It is provided here for your consideration. We thank Mr. Paul Gamble and Mr. Brad Bourland, Head of Research and Chief Economist respectively for sharing this report here.
[Click here for original report with insightful graphs]
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Inflation Report — August 2011
Jadwa Investment
Year-on-year inflation eased to 4.8 percent in August from 4.9 percent in July, primarily due to a fall in food price inflation, though in monthly terms food prices posted their normal Ramadan jump.
Lower year-on-year food price inflation caused the decline in overall inflation in August; inflation for most other components of the cost of living index rose. The fall in food price inflation was the result of the change to the base for the year-on-year comparison (food prices were much higher in August 2010 than July 2010); in monthly terms food prices jumped in line with the norm during Ramadan.
The pick up in inflation elsewhere was fairly subdued. Inflation for clothing and footwear was at its highest level since July 2009, but after several years of falling prices, prices of clothing and footwear are only back to where they were in July 2008. The continued upturn in rental inflation may reflect increased public-sector pay and bonuses encouraging more people to enter the rental market.
Inflation has been between 4.6 percent and 4.9 percent since February despite an increase in government spending and a surge in consumer spending. Survey results and money supply data point to inflationary pressures in the economy, which are likely to push inflation above 5 percent in the coming months, but these pressures are less than we had expected. As a result, we have cut our forecast for average inflation this year to 4.9 percent from 5.4 percent.
Monthly inflation was down sharply from July, though at 0.5 percent it was the second highest since October. The rise was entirely due to food and rents. Food prices posted their usual jump in Ramadan. A rise in food prices of around 2.5 percent in the two Gregorian months that Ramadan covers is on par with recent years; monthly food price inflation slows significantly (though does not always fall) immediately after Ramadan. The growth in rents is slightly more concerning, as rental inflation usually slows in the second half of the year. All the other components of the cost of living index either fell or were unchanged in August. Prices for clothing and footwear, home furniture and education and entertainment all dropped for the first time this year. These sectors are an important guide to the inflation in the Kingdom that is being triggered by higher consumer spending.
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[Click here for original report with insightful graphs]
About Jadwa Investment – Jadwa Investment is a Saudi Closed Joint Stock company operating under the supervision of the Saudi Arabian Capital Markets Authority (CMA). Under the CMA decision published on August 21, 2006, Jadwa was awarded a license to offer all types of investment services including dealing, managing, custody, arranging and advising. All investment services offered by Jadwa Investment are supervised by a Shariah Supervisory Board and are fully Shariah-compliant.
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SUSRIS Reports on Economic Issues:
- Saudi Arabia: Continuing Prosperity – Prince Turki Al-Faisal – SUSRIS – Sep 12, 2011
- September Chartbook – Jadwa – SUSRIS – Sep 9, 2011
- Key Economic Developments – Jadwa – SUSRIS – Sep 3, 2011
- Monthly Bulletin – August 2011 – Jadwa – SUSRIS – Aug 24, 2011
- Saudi Arabia Inflation Report – July 2011 – Jadwa – SUSRIS – Aug 22, 2011
- Inflation Report – Second Quarter 2011 – Saudi Arabian Monetary Agency
- Saudi Economic Trends – Jadwa Chartbook – August 13, 2011
- Debt, Downgrade and Saudi Arabia – Jadwa – August 9, 2011
- The Saudi Stock Market and Ramadan – July 23, 2011
- Saudi Arabia Inflation Report – Jadwa – July 21, 2011
- Saudi Arabia Economics – June 2011 – BSF – July 21, 2011
- Saudi Economic Trends – Jadwa Chartbook – July 20, 2011
- Short Term Inflation Spike – SUSRIS – Jul 16, 2011
- Energy, Consumption Lift Saudi Q3 Business Confidence – Sfakianakis – SUSRIS – June 28, 2011
- Saudi Arabia Economics – SUSRIS – June 21, 2011
- Saudi Arabia Economics – SUSRIS – May20, 2011
- Real Estate Saudi Arabia – SUSRIS – May 12, 2011
- Saudi Arabia Monetary Indicators – April 2011 – SUSRIS – Apr 28, 2011
- Business Confidence Rides on $100 Plus Oil – SUSRIS – March 2011
- Economics Quarterly: To Spend or Not to Spend? – SUSRIS – March 2011
- Monthly Monetary Indicators – SUSRIS – March 2011
- Reaching Out Again: Financial Support Analyzed – BSF – Mar 23,2011
- Royal decrees, regional unrest and the economy – Jadwa – SUSRIS – Mar 23, 2011
- Saudi Arabia Economics – BSF – Mar 22, 2011
- Monthly Monetary Indicators – March 2011
- Emerging Markets: What is next for Saudi Arabia? – March 2011
- Employment Quandary: Urgency for Reform – SUSRIS – February 2011
- Saudi Arabia Monetary Indicators – SUSRIS – February 2011
- Uprising in Egypt and Financial Volatility – SUSRIS – January 31
- Saudi Arabia Economics – SUSRIS – January 2011
- Saudi Business Leaders Bullish in 2011, BSF Confidence Index Show- SUSRIS
- Why Are Economists Bullish on Saudi Arabia’s 2011 Economic Prospects – SUSRIS
- Saudi Arabia Monetary Indicators – January 2011 – SUSRIS
- Ready to Roll: 2011 Saudi Budget: Sfakianakis – SUSRIS – Dec 21, 2010
- Saudi 2011 Budget Reflects Solid Economy – SUSRISblog – Dec, 21, 2010
- Saudi Arabia Monetary Indicators – December 2010
- Saudi Arabia Economics – December 2010 – SUSRIS – Dec 7, 2010
- Saudi Monetary Indicators – November 2010 – SUSRIS – Nov 12, 2010
- Saudi Arabia Business Confidence Index – 2010Q4 – SUSRIS – Oct 19, 2010
- Saudi Arabia Economics – BSF – October 2010 – SUSRIS – Oct 11, 2010
- Jadwa Monthly Economic Bulletin – September 2010 – SUSRIS – Oct 9, 2010
- Saudi Monthly Monetary Indicators from BSF 10-06-10 – SUSRIS – Oct 7, 2010
- Saudi Monetary Indicators for August 2010 – SUSRIS – Sep 1, 2010
- Saudi Arabia Economics – August 2010 – SUSRIS – Aug 22, 2010
- August Bulletin – Jadwa Investment – SUSRIS – Aug 10, 2010
- Saudi Economic Trends – Jadwa Chartbook – August 2010 – SUSRIS – Jul 31, 2010
- Saudi Monetary Indicators for July 2010 – SUSRIS – Jul 7, 2010
- Saudi Monetary Indicators for June 2010 – SUSRIS – Jun 30, 2010
- Saudi Economic Trends – Jadwa Chartbook – June 2010 – SUSRIS – Jun 1, 2010
- Euro crisis and its impact on Saudi Arabia – Jadwa – SUSRIS – May 29, 2010
- Saudi Arabia Economics – May 2010 – SUSRIS – May 25, 2010
- Saudi Monetary Indicators for April 2010 – SUSRIS – May 25, 2010
- Vulnerability to European “Shockwaves” – Sfakianakis – SUSRIS – May 17, 2010
- Jadwa Investment May 2010 Bulletin – SUSRIS – May 17, 2010
- Greek Debt Crisis and the Kingdom – SUSRIS – May 11, 2010
- Jadwa Investment April 2010 Bulletin – SUSRIS – Apr 28, 2010
- U.S. Exports to Arab World Rebounding – SUSRIS – Apr 16, 2010
- Saudi Economic Trends – Jadwa Chartbook – April 2010
- Saudi Stock Market Report – Jadwa Investment – SUSRIS IOI – Mar 21, 2010
- Jadwa Chartbook – March 2010
- Jadwa Chartbook – February 2010
