Inflation Report- May 2013

According to latest CPI data, Saudi Arabias inflation for May slowed to 3.8 percent year-on-year brought down by a significant fall in the core index to 2.6 percent. Despite slowing core inflation, the food and rent/housing components accelerated in May and remained the main contributors to headline inflation. While domestic inflationary pressure is likely to persist, we see the current inflationary trend as more of a demand-pull inflation rather than a cost-push inflation caused by recent labor market reform initiatives.