Saudi Arabia’s inflation reading inches up in 4Q: The Kingdom’s average Consumer Price Index (CPI) saw a 1.9% y-o-y increase in 4Q 2024, according to the Saudi Central Bank’s quarterly inflation report (pdf). The reading was up 1.7% y-o-y in 2024.

Rent is the main culprit: The rise in 4Q was attributed to an increase in the segment of housing, water, electricity, gas, and other fuels — mainly driven by a rise in housing rents. The segment recorded the highest y-o-y inflation rate among the Kingdom’s basket of goods and services, rising by 9.2% over the same period.

Why were housing rents so high? “This rise may be attributed to the growing domestic demand resulting from population growth in major cities, and the expansion in tourism and recreation activities, alongside slower housing supply, which contributed to widening the gap between supply and demand in the rental housing market,” according to the report.

More on the drivers: Miscellaneous goods and services came second at a 2.4% increase in 4Q, followed by restaurants and hotels at 1.4%, education at 1.1%, and food and beverages at 0.4%. Meanwhile, furnishings, household equipment and maintenance posted the highest y-o-y decrease, declining by 2.9% over the quarter.

Looking ahead: The Kingdom’s inflation reading is expected to remain stable in Q1 2025, driven by “slowing global inflation as a result of lower commodity prices (food and energy), in addition to rising housing rents and higher domestic demand in general, reflecting improvements in employment rates among Saudis,” the report reads.

REMEMBER- Inflation rebounded slightly to 2.0% y-o-y in January, up from 1.9% in December, in what marked a continued overall upward trend for the Kingdom’s inflation figures over the last five months. Capital Economics expects the Kingdom’s headline inflation rate to hover around 2% y-o-y until 4Q, before slowing back down towards the 1% mark. Meanwhile, the IMF sees inflation holding steady at 1.9% and 2.0% this year and the next, while the Al Rajhi Capital sees inflation remaining stable at 2.1% in 2025 before cooling slightly to 2.0% in 2026.

MEANWHILE- The Wholesale Price Index (WPI) increased 1.6% y-o-y in 4Q 2024, with transportable goods (except metal products machinery and equipment) logging the highest y-o-y increase at 3.5%, followed by agriculture and fishery products (2.4%).

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