Inflation slightly accelerated to 2.3% y-o-y in June, up 0.1 percentage point from May, driven mainly by a 6.5% increase in prices of housing, water, electricity, gas and other fuels — the heaviest component in the consumer basket, according to the General Authority for Statistics’ (Gastat) latest consumer price index (pdf).

On a monthly basis, consumer prices rose 0.2% last month, primarily due to a 0.2% rise in the housing, water, electricity, gas, and other fuels section, driven by a 0.3% rise in actual housing rent prices.

Housing, water, electricity, gas, and other fuels saw a 6.5% increase y-o-y during the month, a slight decrease from a 6.8% rise y-o-y in May. Rents paid for housing drove the increase, up 7.6% in June, attributed to a 7.1% jump in villa rental prices.

Food and beverage prices also inched up 1.5% y-o-y, pushed by a 2.4% rise in meat and poultry prices. Personal goods and services edged up 4.1% y-o-y, stemming from a 26.5% increase in the prices of jewelry, watches, and precious antiques.

ALSO- Restaurant and hotel prices went up 1.6%, due to a 1.9% rise in restaurant and cafe prices. Finally, education prices was up 1%, mainly led by a 5.0% increase in tertiary education fees.

Declines observed in other sections: Furnishing and home equipment prices fell 1.7% y-o-y, largely due to a 3.6% drop in prices of furniture, carpets and flooring. Meanwhile, clothing and footwear prices decreased by 0.6%, affected by a 1.4% decline in garment prices. Transportation prices also fell 0.7%, on the back of a 1.7% drop in vehicle purchase prices.

Looking ahead: Headline inflation in the Kingdom is likely to accelerate a little further throughout 3Q 2025 before peaking at around 2.6% y-o-y, Capital Economics’ James Swanston wrote in a recent research note seen by EnterpriseAM. “While it is likely to rise a little further [in] the coming months, we think there will be a return to disinflation as we head into 2026,” Swanston added in the note.

CE also expects inflation to average 0.8% y-o-y in 2026, which is (really) optimistic when compared to other forecasts. Riyad Capital sees inflation rising to 2.5% this year, before easing slightly to 2.3% in 2026, up from an inflation reading of 1.7% in 2024. The International Monetary Fund (IMF) said in June that inflation in Saudi Arabia will remain around 2% this year, supported by the currency’s peg to the USD, domestic subsidies, and a flexible labor supply.

Rental inflation is poised for a downturn: “Lower import price pressures from China – Saudi’s main import market – and further downward pressure on the residential real estate market amid reforms should keep rentals inflation on a downward path,” according to the research note.

Regional outlook: Inflation across the Gulf is set to moderate in 2H 2025 amid falling oil and shipping prices as geopolitical tensions ease and as the US Federal Reserve is expected to resume its rate-cutting cycle, Emirates NBD said in a recent report (pdf). Inflation across the bloc has been modest so far in 2025, averaging 1.3% y-o-y from January to May, marking a slowdown from 1.8% recorded last year.

WHOLESALE PRICE INDEX-

Producer prices rose by 2.1% y-o-y in June, driven by a 4.5% increase in the prices of other transportable goods, except metal products, machinery and equipment, as well as a 4.4% rise in the prices of agriculture and fishery products, according to Gastat’s wholesale price index (pdf).

Wholesale prices decreased by 0.1% during the month, which was attributed to a 0.2% drop in the prices of metal products, machinery, and equipment. This decline was largely influenced by a 0.5% drop in the prices of radio, television and communication equipment and apparatus and a 0.5% dip in the prices of general-purpose machinery.

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