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Saudi consumer prices fall for second straight month in Feb

Saudi consumer prices fall for second straight month in Feb

The impact of implementation of a value-added tax last year eased this year

Saudi Arabia’s annual consumer price index fell for a second straight month in February, signalling a deflationary environment in the Arab world’s biggest economy.

The CPI index for February fell 2.2 per cent from a year earlier, as prices for housing, water and energy all dropped, government data showed on Tuesday.

The index fell 0.2 per cent from January, according to data from the General Authority for Statistics. In January, it dropped 1.9 per cent from a year earlier, the first decline since 2017, as the effect faded of last year’s implementation of a value-added tax..

In February, the housing, water, electricity and fuel component of the index dropped 8.2 per cent from a year earlier. Clothing and footwear slid 1.2 per cent.

The restaurant and hotel category rose 1.5 per cent and education went up 1.2 per cent from a year earlier.

“A key factor for the deflationary outlook for 2019 is the fall in rental prices, which is dragging down the housing and utility sub-component of the inflation basket,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

“We continue to see further downward pressure with additional expatriate job losses, though likely not as high as in 2018.” ADCB had projected a 0.9 per cent drop in CPI in 2019.

The United Arab Emirates, which also implemented VAT, saw a 2.39 per cent drop in its annual consumer price index in January.

Dubai-based LightHouse Research said in a recent note that it is no longer inconceivable the next move by Gulf central banks will be a rate cut, rather than an increase, after the temporary halt in rate increases by the U.S. Federal Reserve.

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