Saudi Arabia: Marginal rise in March inflation on seasonal pressures

Headline inflation in Saudi Arabia was broadly stable in March, rising only modestly on an annual basis to 1.8%, from 1.7% in February. Prices were 0.3% higher than the previous month. Inflation in Saudi Arabia has been low and stable over the past several years, and had been modestly disinflationary in recent months, with the February print the lowest reading in a year. While there was a modest uptick in the headline measure last month, there was no evidence of a rise in price pressures emanating from the US-Iran conflict that is reintroducing inflation concerns elsewhere.

The primary driver of the modest acceleration in prices last month was the food & beverages component of the basket, which is the largest at around 22% of the total. From flat in February it rose to 0.3% y/y, driven by a 0.5% m/m gain (from -0.5% in February). This can largely be attributed to the seasonal effects of Ramadan, which usually coincides with monthly rises in food prices. Similarly, restaurants & hotels, which makes up 6% of the basket, is also subject to similar seasonal trends, and there was an acceleration in the annual inflation measure to 2.2%, from 2.0% previously, with a m/m rise of 0.6%, from 0.3% m/m in February. According to the GASTAT statement, this was driven by a 4.0% y/y rise in accommodation services prices...

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