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Investing.com -- Saudi Arabia’s headline inflation rate slowed to 2.1% year-on-year in July, down from 2.3% in June, marking its weakest pace since February.
The July figure came in below both consensus expectations of 2.3% and Capital Economics’ forecast of 2.7%. On a seasonally-adjusted annualized basis, prices declined by 0.9%, representing the first negative reading since March 2024 and the weakest pace in over two years.
A breakdown of the data revealed that food and beverages inflation experienced a modest uptick to a three-month high of 1.6% year-on-year.
This increase stemmed from small rises across various sub-components, particularly bread and cereals, meat, and fruits and nuts.
However, the food inflation increase was more than offset by softer non-food inflation, which slowed from 2.4% year-on-year in June to a five-month low of 2.2%.
While there was a slight easing in education, restaurants and hotels, and home furnishings inflation, the main driver was another decline in housing and utilities inflation, which accounts for over a quarter of the consumer price index basket.
The Kingdom’s efforts to reform the real estate market and increase housing supply appear to be yielding results, as evidenced by the continued easing of rentals inflation.
Looking forward, headline CPI inflation is expected to edge lower throughout the remainder of 2025 and fall toward 1% by early 2026.
Energy inflation is likely to remain contained with the fuel price cap staying in place, while lower global food prices are anticipated to push down food inflation. Housing-related price pressures are also expected to continue softening.
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