The cost of living index rose by 4.6 percent in February as a result of a rise in prices in six major categories, the General Statistics Department at the Ministry of Economy and Planning said.
It said the prices of rent, fuel and water rose by 10.6 percent; services 5.8 percent; food and beverages 4.0 percent; house furniture 3.0 percent; education and recreation 1.1 percent and health care 0.1 percent.
The department also noted that prices of clothing, textiles and shoes went down by 0.3 percent and transport and communications 0.2 percent.
The quarterly inflation rate in the Saudi economy continued its upward trend over the last two quarters of 2009. The quarterly inflation rate went up from 0.5 percent in the second quarter of 2009 to 1.2 percent in the third quarter of 2009, and then to 1.5 percent in the fourth quarter of 2009, the Saudi Arabian Monetary Agency (SAMA) said in its fourth quarter 2009 inflation report.
The main driver for inflation in February was principally food and not so much rents. Rents did increase on a month-on-month basis but food prices rose more between January and February. Rents have been coming down on a year-on-year basis, however, just as predicted by SAMA, said John Sfakianakis, group general manager and chief economist at Banque Saudi Fransi.
He said food prices globally have been rising and as a result food inflation in Saudi Arabia has witnessed a rise. This is an expected trend as Saudi Arabia imports around 65-70 percent of its food needs. Inflation would be volatile, especially on food as prices globally continue to fluctuate. Food comprises 26 percent of the inflation basket compared to rents (18 percent), resulting in inflationary pressures when food prices move up or down.
"Overall inflation in Saudi Arabia should be lower in 2010 than 2009 at an average rate of 4.3 percent," Sfakianakis added.
The Saudi economy is an open-market based economy, which is reflected by data of foreign trade with trading partners of the Kingdom. Therefore, the change in the prices of imported goods is an important factor affecting the level of domestic inflation, the SAMA report said.
A high degree of economic openness of a country causes the domestic inflation rate to be affected by change in the prices of goods in the country of origin.
