inflation report first quarter 2012 - sama...2004 - 2011 is still low compared to the average rate...
TRANSCRIPT
Inflation Report
First Quarter 2012
Saudi Arabian Monetary Agency
Research and Statistics Department
2
- Table of Contents -
1. Introduction ……………………………………………...……….. 4
2. Inflation Trends During the Past Few Years ……….…………….. 4
3. The Level of Current Performance of Inflation Indicators
in the kingdom …………………………………………………… 7
3-1 All Cities Cost of Living Index ….………..…………......... 7
3-2 Wholesale Price Index ………….……...…….……….……... 9
3-3 GDP Deflator ………………...……………………….…....... 11
4. Geographical Distribution of Inflation Rate in the Kingdom …..... 12
5. Inflation and Foreign Trade with Major Trading Partners of
the Kingdom …………………………………………………........ 15
6. Indicators of the General Trend and Fluctuation in Inflation Rates 16
7. Factors Affecting Inflation Rate ………………………………… 19
8. Inflation Projections for the Second Quarter of 2012 …………….. 21
9. Conclusion ……………………………………………………....... 22
3
- List of Tables and Charts -
Table 1: Change in the General Cost of Living Index and Its Major
Groups.
Table 2: Comparison of Inflation Rates in Some Countries.
Table 3: Quarterly and Annual Cost of Living Indices Up to the End of
The First Quarter of 2012 (1999=100).
Table 4: Quarterly and Annual Wholesale Price Indices up to the End of
The First Quarter of 2012 (1998=100).
Table 5: Nominal GDP Growth and Annual Rate of Change in the
Deflator.
Table 6: Cost of Living Indices by Cities.
Table 7: Sources of the Kingdom's Imports and Inflation Rates.
Table 8: Descriptive Statistics for Monthly Inflation Rates.
Table 9: Descriptive Statistics for Quarterly Inflation Rates: First
Quarter 2007 - First Quarter 2012.
Table 10: Most Significant Factors Affecting Inflation Rate in the
Kingdom.
Chart 1: Comparison between Inflation Levels During the Year Ending
March 2012 and those During the Preceding Five Years.
Chart 2: Quarterly Developments in the General Cost of Living Index
(1999=100).
Chart 3: Quarterly Developments in the General Wholesale Price Index
(1988=100).
Chart 4: Annual Change in the Non-oil GDP Deflator During 2006
- 2011.
Chart 5: Change in the General Index in the First Quarter of 2012
Compared to the Fourth Quarter of 2011.
Chart 6: Change in the General Index in the First Quarter of 2012
Compared to the First Quarter of 2011.
Chart 7: General Trend of Quarterly Inflation Rates.
Chart 8: General Trend of Monthly Inflation Rates.
Chart 9: Comparison of Quarterly Inflation Rate, Growth Rate in Money
Supply (M3) and Change in Oil Prices.
4
1. Introduction
Inflation - the continuous rise in the overall level of prices - is a
phenomenon which almost goes in line with economic growth in many
instances. The main factors that cause inflation are not different from one
economy to another, but other factors that cause it vary due to reasons related to
the nature of the economy, its diversification base, its openness to the external
world and prevalent business practices, as well as seasonal factors that may vary
from one economy to another.
The report highlights inflation rates in the Saudi economy and their
general trends by using the general cost of living index in the Kingdom (issued
by the Central Department of Statistics and Information). Some parts of the
report also review other indices to measure the general wholesale price index
and the GDP deflator. In addition, the report presents a summery of inflation
expectations for the first quarter of 2012.
2. Inflation Trends during the Past Few Years
The annual average rate (moving average) as measured by the annual
change in the general cost of living indices during the year ending March 2012
rose by 5.1 percent, compared to the average inflation rate of 5.5 percent during
the previous five years (April 2006 - March 2011).
During the period starting with April 2011 – March 2012, four main
groups, representing about 43 percent of the size of the cost of living basket,
registered inflation rates higher than the averages they recorded in the previous
five years. The group of goods and other services rose by 8.8 percent, the group
of transport and telecommunications by 2.2 percent, the group of education and
entertainment by 2.2 percent, the group of fabrics, clothing and footwear by 1.1
percent as compared to the average during the past five years.
5
On the other hand, the other main groups that comprise the general cost of
living index registered inflation rates lower than the averages recorded during
the previous five years. The group of renovation, rent, fuel and water (housing
and its appurtenances) rose by 7.9 percent, the group of food and beverages by
4.8 percent, the group of medical care by 0.5 percent. Lastly, the group of
furnishing went up by 1.4 percent (Table 1 and Chart 1).
Table 1: Change in the General Cost of Living Index and its Major Groups
(%)
Volume
(relative
importance)
Average of
Inflation level
for the period
Apr 2006 -
Mar 2011
The Average
for the period
Apr 2011 - Mar
2012
General Index
Food and Beverages
Fabrics, clothing and footwear
Renovation, rent, fuel & water
Home furnishing
Medical care
Transport & telecommunication
Education & entertainment
Other goods & services
100
26
8
18
11
2
16
6
13
5.5
7.0
-0.6
10.5
4.1
2.4
-0.2
1.0
7.3
5.1
4.8
1.1
7.9
1.4
0.5
2.2
2.2
8.8
Source: Central Department of Statistics
and Information
6
Chart 1 compares the average level of inflation during the year ended March
2012 with its level during the past five years. The points to the left of Line 45°
indicate higher average of inflation during the year ended March 2012 compared
to the average during the past five years (the opposite in the negative side).
Chart 1: Comparison between Inflation Levels During the Twelve Months
Ended Mar 2012 and those during the Preceding Five Years
Table 2 shows that the average inflation rate in the kingdom during the period
2004 - 2011 is still low compared to the average rate in some countries
(excluding Bahrain and Peoples Republic of China).
General Index
Food and Beverages
Fabrics, apparel & shoes
Housing Furniture
Mdical care
Transport & telecommunication
Education & entertainment
Goods and other Serveces
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
-2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0
Avera
ge
In
de
x f
or
the
P
eri
od
Ap
r 2011-M
ar
2012
Average Index for the Period Apr 2006 -Mar 2011
Chart 1 : Comparison between Inflation Levels during the
Twelve Months Ended Mar 2012 and Those During the
Preceding Five Years.
7
Table 2: Comparison of Inflation Rates in Some Countries
(Annual Percent Change)
Country 2004 2005 2006 2007 2008 2009 2010 *2011 Average
Bahrain
Brazil
China
Egypt
India
Jordan
Kuwait
Oman
Qatar
Saudi Arabia
Turkey
United Arab Emirates
Venezuela
2.2
6.6
3.9
8.1
3.9
3.4
1.3
0.7
6.8
0.4
8.6
5.0
21.7
2.6
6.9
1.8
8.8
4.0
3.5
4.1
1.9
8.8
0.6
8.2
6.2
16.0
2.0
4.2
1.5
4.2
6.3
6.3
3.1
3.4
11.8
2.2
9.6
9.3
13.7
3.3
3.6
4.8
11.0
6.4
4.7
5.5
5.9
13.8
4.1
8.8
11.1
18.7
3.5
5.7
5.9
11.7
8.3
13.9
10.6
12.6
15.0
9.9
10.4
12.3
30.4
2.8
4.9
-0.7
16.2
10.9
-0.7
4.0
3.5
-4.9
5.1
6.3
1.6
27.1
2.0
5.0
3.3
11.7
12.0
5.0
4.1
3.3
-2.4
5.3
8.6
0.9
28.2
1.0
6.6
5.5
11.1
10.6
5.4
6.2
3.8
2.3
5.0
6.0
2.5
25.8
2.4
5.4
3.3
10.4
7.8
5.2
4.9
4.4
6.4
4.1
8.3
6.1
22.7
*Estimated Data
Source: International Monetary Fund, World Economic Outlook Database, Apr 2012.
3. The Level of Current Performance of Inflation Indicators in the Kingdom
3-1 All Cities Cost of Living Index
This index is the most common measure of inflation used for all cities in the
Kingdom. It measures price changes of goods and services for consumers. The index
includes 406 goods and services compiled on a monthly basis from sixteen cities.
Table (3) shows all cities’ cost of living indices, and quarterly and annual rates of
change up to the end of the first quarter of 2012 (The base year 1999=100).
Table (3) shows that the average general cost of living index registered an
increase of 0.6 percent in the first quarter of 2012 compared to the fourth quarter of
2011. This increase was attributed to rises in the group of education and entertainment
and the group of food and beverages by 0.1 percent each, the group of renovation and
rent by 2.8 percent, the group of fabrics, clothing and footwear by 1.6 percent, the groups
of transport and telecommunications by 1.1 percent, the group of house furnishing by
0.5 percent, while the group of medical care remained unchanged, and the group of
goods and other services went down by 2.1 percent.
8
Table 3: Quarterly and Annual Cost of Living Indices up to the End of the First Quarter of 2012
1999 = 100
Change
of
Annual
Average
2011
%change of
1st quarter 12
against
corresponding
quarter of
previous year
%
change
of 1st
quarter
12
against
4th11
quarter
11
Quarterly Indices Annual
Averages
Groups of
Goods and Services First
Quarter
2012
Fourth
Quarter
2011
Third
Quarter
2011
Second
Quarter
2011
First
Quarter
2011
2011 2010
5.0 5.4 0.6 139.5 138.7 136.7 133.7 132.3 135.3 128.9 General Index
5.1 4.4 0.1 159.7 159.5 157.7 154.1 152.9 156.1 148.4 Food and Beverages
0.4 2.6 1.6 87.8 86.4 86.0 85.8 85.6 86.0 85.7
Fabrics, Apparel and
Shoes
7.6 9.1 2.8 182.9 177.8 174.7 170.9 167.6 172.7 160.3
Renovation, Rent, Fuel
and Water
0.6 3.2 0.5 118.9 118.3 116.2 115.6 115.3 116.3 115.7 House Furnishing
0.8 0.0 0.0 114.6 114.6 114.6 114.6 114.6 114.6 113.7 Medical Care
2.1 2.3 1.1 93.6 92.6 92.5 92.0 91.5 92.1 90.2
Transport and
Telecommunications
1.7 3.5 0.1 107.5 107.4 103.9 103.9 103.9 104.8 103.2
Education and
Entertainment
9.1 7.8 -2.1 167.5 171.1 167.3 158.1 155.4 163.0 149.6 Goods and other Services
Source: Central Department
of Statistics and Information
Data in Table (3) and Chart (2) indicate an increase of 5.4 percent in the
average Cost of Living index1 in the period ended in the first quarter of 2012
compared to the corresponding quarter of the previous year. This increase was
ascribed to rises in the group of other goods and services by 7.8 percent, the group of
renovation, rent and fuel by 9.1 percent, the group of food and beverages by 4.4
percent, the group of education and entertainment by 3.5 percent, the group of house
furnishing by 3.2 percent, the group of transport and telecommunications by 2.3
percent and the group of fabrics, apparel and shoes by 2.6 percent. However, the group
of medical care remained unchanged.
The group of renovation, rent and fuel contributed a 1.8-point increase to the
general index (34.0 percent of total impact on the general index), the group of other
goods and services 1.6 point (30.0 percent), the group of food and beverages 1.1 point
(21.7 percent).The remaining groups contributed by rates equal to or lower than 1.0
1The average here is for the first quarter of 2012 against its corresponding quarter of 2011. It is different from the
average inflation rate (moving average) indicated in section 2 of this report.
9
percent of the total impact on the general index. The group of medical care was the
sole group that had a little impact of decrease on the general index by 0.002 point or
0.03 percent.
3-2 Wholesale Price Index
This index measures wholesale prices in a basket of 160 items sold in the
(primary) wholesale markets in the Kingdom. Table (4) shows quarterly and annual
wholesale price indices up to the end of the first quarter of 2012. The table indicates
that the wholesale price index recorded a rise of 3.3 percent during the first quarter of
2012 compared to its corresponding quarter of 2011. This was ascribed to a rise in nine
of the groups constituting the wholesale price index. The group of other commodities
rose by 15.9 percent, the group of miscellaneous manufactured articles by 7.5 percent,
the group of chemicals and related products by 13.8 percent, the group of vegetable
and animal oils & fats by 4.0 percent, the group of machinery and transport equipment
by 3.6 percent, the group of crude materials (except fuel) by 3.7 percent, the group of
manufactured goods classified by substance by 1.1 percent, the group of food and live
animals by 2.3 percent, and the group of beverages and tobacco by 0.2 percent. The
group of mineral fuels and related products remained unchanged.
132.3
133.7
136.7
138.7 139.5
128.0
130.0
132.0
134.0
136.0
138.0
140.0
142.0
1st Q. 2011 2nd Q. 2011 3rd Q. 2011 4th Q. 2011 1st Q. 2012
Chart 2: Quarterly Developments in the General Cost of Living Index
01
Table 4: Quarterly and Annual Wholesale Price Indices up to the End of the First Quarter of 2012
1988 = 100
Change
of
Annual
Average
2011
% change of
1st quarter 12
against
corresponding
quarter of
previous year
% change
of 1st
quarter 12
against 4th
quarter 11
Quarterly Indices Annual
Averages
Groups of
Goods and Services First
Quarter
2012
Fourth
Quarter
2011
Third
Quarter
2011
Second
Quarter
2011
First
Quarter
2011
2011 2010
4.2 3.3 0.9 155.1 153.7 153.9 152.7 150.2 152.6 146.4 General Index
3.4 2.3 0.2 175.7 175.4 174.3 174.7 171.8 174.1 168.3 Food & Live Animals
0.9 0.2 -0.3 151.5 152.0 151.2 151.2 151.2 151.4 150.0 Beverages & Tobacco
10.1 3.7 1.8 216.7 212.8 212.7 211.2 209.1 211.5 192.1 Crude Materials (except fuel)
0.0 0.0 0.0 184.8 184.8 184.8 184.8 184.8 184.8 184.8 Mineral Fuels & related
products
7.3 4.0 -0.1 150.0 150.1 150.0 147.3 144.2 147.9 137.8 Vegetable Oils & Fats
12.5 13.8 8.8 205.5 188.8 193.6 191.4 180.5 188.6 167.6 Chemicals & Related
Products
3.1 1.1 0.1 142.7 142.6 143.0 143.1 141.1 142.5 138.2 Manufactured Goods
classified by substance
4.4 3.6 0.7 134.8 133.8 132.6 131.5 130.1 132.0 126.4 Machinery & Transport
Equipment
7.9 7.5 -0.5 149.8 150.5 152.0 140.3 139.3 145.5 134.9 Msc. Manufactured Articles
23.0 15.9 0.6 304.4 302.4 318.7 270.8 262.6 288.6 234.6 Other Commodities
Source: Central Department
of Statistics and Information.
The general wholesale price index recorded a rise of 0.9 percent during the first
quarter of 2012 compared to the fourth quarter of 2011. This rise was attributed to six
groups constituting the wholesale price index. The group of machinery & transport
equipment went up by 0.7 percent, food and live animals by 0.2 percent, chemicals and
related products by 8.8 percent, crude materials (except fuel) by 1.8 percent,
manufactured goods classified by substance by 0.1 percent, and other commodities by
0.6 percent. Meanwhile, one group, mineral fuels and related products, remained
unchanged. However, three groups recorded a decrease during the period under study
compared to the fourth quarter of 2011. The group of miscellaneous manufactured
articles decreased by 0.5 percent, the group of vegetable and animal oils & fats by 0.1
percent, the group of beverages and tobacco by 0.3 percent.
00
3-3 GDP Deflator
This deflator measures the prices of domestically produced commodities
through the deflator of the oil and non-oil sectors. The non-oil deflator reflects
domestic inflation by excluding change in crude oil prices. Table (5) and Chart (4)
show the non-oil deflator and the growth rate of the annual GDP from 2006 to 2011, in
addition to the rate of change in the general cost of living index. The non-oil deflator
registered an increase of 6.1 percent in 2011 compared to an increase of 3.3 in 2010.
Table 5 : Nominal GDP growth and Annual Rate of Change in the Deflator
Rate of Change in
the Annual
General Cost of
Living Index (%)
Growth Rate of
Non-oil GDP
Deflator
Growth Rate of GDP
at Current Prices
(Excluding Import
Duties)
Years
(011 =0111)
2.2 3.7 13.0 2006
4.1 1.6 8.0 2007
9.9 3.1 23.8 0228
5.1 3.3 -21.0 0229
5.3 2.5 18.9 2010*
5.0 6.1 28.0 **0211
*Data of GDP 2010 Provisional. ** Data for 2011 are obtained from the state budget for 1433H (2012).
Source: Central Department of Statistics and Information.
150.2
152.7
153.9 153.7
155.1
147.0
148.0
149.0
150.0
151.0
152.0
153.0
154.0
155.0
156.0
1st Q. 2011 2nd Q. 2011 3rd Q. 2011 4th Q. 2011 1st Q. 2012
Chart3: Quarterly Developments in the Wholesale Price Index
02
4. Geographical Distribution of Inflation Rate in the Kingdom
The general cost of living index (for all cities) registered a rise of 0.6 percent to
139.5 in the first quarter of 2012 compared to the fourth quarter of 2011. Seven cities
(Al-Madinah, Al-Hufuf, Tabuk, Jeddah, Abha, Al-Dammam and Najran) recorded
higher quarterly rates than the growth rate in the general cost of living index. The
remaining cities recorded lower or equal growth rates than that of the rate of growth in
the general cost of living index for all cities (Table 6 and Chart 5).
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2006 2007 2008 2009 2010 *2011
Chart 4 : Annual Change in the Non-oil GDP Deflator during 2006-2011*
Growth Rate of Non-oil GDP Deflator Rate of Change in the Annual General Cost of Living Index Growth Rate of GDP at Current Prices (Excluding Import Duties)
* The right axis above shows the growth rate of GDP
03
Table 6: Cost of Living Indices by Cities
Annual
Change*
Quarterly
Change
First
Quarter
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
(%) (%) 2012 2011 2011 2011 2011
5.4 0.6 139.5 138.7 136.7 133.7 132.3 General Index
(All cities)
5.2 0.0 145.1 145.1 143.1 139.6 137.9 Riyadh
4.8 0.0 131.0 131.0 128.5 126.5 125.0 Makkah
3.9 1.1 135.9 134.4 134.2 131.9 130.8 Jeddah
7.5 0.2 151.1 150.8 148.9 142.0 140.5 Ta'if
6.8 1.9 130.5 128.1 124.0 123.1 122.2 Al-Madinah
4.7 -1.1 138.7 140.2 138.5 134.8 132.5 Buraydah
7.8 0.7 150.4 149.3 144.8 141.0 139.5 Al-Dammam
4.0 2.2 133.6 130.7 130.3 129.8 128.5 Al-Hufuf
6.0 1.2 130.4 128.9 126.6 123.9 123.0 Abha
9.8 1.5 134.9 133.0 129.0 124.2 122.9 Tabuk
4.5 0.4 139.6 139.1 137.3 134.4 133.6 Ha'il
4.2 0.2 136.8 136.5 134.9 132.6 131.3 Jazan
5.8 0.7 138.2 137.2 135.4 131.6 130.6 Najran
3.1 -0.6 132.6 133.4 132.8 129.9 128.6 Al-Baha
2.7 -0.2 119.5 119.8 118.8 117.1 116.3 Sakaka
1.6 0.1 112.7 112.6 112.6 111.3 110.9 Ar'ar
* Comparison between Fourth quarter of
2011 and Fourth quarter of 2010.
Source: Central Department of Statistics
and Information.
0.6
0.0 0.0
1.1
0.2
1.9
-1.1
0.7
2.2
1.2 1.5
0.4 0.2
0.7
-0.6
-0.2
0.1
-1.6
-0.8
0.0
0.8
1.6
2.4
Gen
eral
In
dex
Riy
adh
Mak
kah
Jedd
ah
Ta'
if
Al-
Mad
inah
Bura
yd
ah
Al-
Dam
mam
Al-
Hufu
f
Abh
a
Tab
uk
Ha'
il
Jaza
n
Naj
ran
Al-
Bah
a
Sak
aka
Ar'
ar
Chart 5: Change in the General Index in the First Quarter of 2012
Compared to the Fourth Quarter of 2011
04
The general cost of living index (all cities) registered an annual rise of 5.4
percent in the first quarter of 2012. Six cities (Tabuk, Al-Dammam, Ta'if, Najran,
Abha and Al-Madinah) recorded annual rises higher than the rate of growth in the
general index. It could be noted that Tabuk recorded an annual rise higher than the rest
of the cities which stood at 9.8 percent. Most of the other cities, however, recorded
annual rises equal to or lower than the rate of growth in the general index (Table 6 and
Chart 6).
5.4 5.2 4.8 3.9
7.5 6.8
4.7
7.8
4.0
6.0
9.8
4.5 4.2
5.8
3.1 2.7
1.6
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Gen
eral
Index
Riy
adh
Mak
kah
Jedd
ah
Ta'
if
Al-
Mad
inah
Bu
rayd
ah
Al-
Dam
mam
Al-
Hufu
f
Ab
ha
Tab
uk
Ha'
il
Jaza
n
Naj
ran
Al-
Bah
a
Sak
aka
Ar'
ar
Chart 6: Change in the General Index in theFirst Quarter of 2012
Compared to the First Quarter of 2011
05
5. Inflation and Foreign Trade with Major Trading Partners of the Kingdom
The Saudi economy is an open-market based economy which is reflected by
data of foreign trade with trading partners of the Kingdom. High degree of economic
openness of a country causes the domestic inflation rate to be affected by change in
the prices of goods in the country of origin. Table (7) shows the values of the
Kingdom’s imports from major trading partners during 2011.
The United States is the largest trading partner of the Kingdom, though the
relative share of imports from USA declined during 2011 to 12.9 percent from 19.3
percent in 2000. The value of imports from the United States rose by 147.0 percent to
Rls 53.8 billion during 2011 from Rls 21.8 billion in 2000. Figures indicate that the
inflation rate in the USA increased by 3.0 percent during 2011 compared to 3.4
percent in 2000.
As for the Kingdom’s imports from the Euro zone during 2011, imports from
Germany went up by 223.9 percent to Rls 29.8 billion compared to 2000, from Italy
by 231.9 percent to Rls 15.6 billion, from France by 193.6 percent to Rls 13.8 billion,
and from other Euro zone countries by 347.5 percent to Rls 139.2 billion.
The inflation rate in the People's Republic of China (PRC) rose by 5.5 percent in
2011 compared to an increase of 0.4 percent in 2000. The relative share of the
Kingdom’s imports from PRC rose from 4.0 percent in 2000 to 13.9 percent in 2011,
amounting to Rls 58.3 billion. The relative share of the Kingdom’s imports from India
also rose from 2.8 percent in 2000 to 3.5 percent in 2011 and stood at Rls 14.7 billion.
India witnessed higher inflationary pressures especially during the last three years,
with the inflation rate reaching 10.9 percent in 2011 due to higher domestic
consumption. Data of the IMF (World Economy Outlook, April 2012) indicate higher
inflation rates in the Kingdom's trading partners during 2011 compared to 2010.
06
Table 7: Sources of the Kingdom’s Imports and Inflation Rates
Inflation
Rate (%)
(%) Share of
Imports
Imports (Million
Riyals) Country
2011* 2000 2011* 2000 2011* 2000
3.0 3.4 12.9 19.3 53857 21802 United States
-0.4 -0.7 6.3 10.5 26503 11837 Japan
5.5 0.4 13.9 4.0 58301 4485 Republic of China
4.5 0.9 2.9 6.5 12158 7308 United Kingdom
4.5 2.3 6.4 3.4 26782 3846 South Korea
10.6 4.0 3.5 2.8 14732 3132 India
3.5 4.5 1.3 2.6 5530 2907 Australia
2.5 2.2 19.6 23.7 81993 26878 Euro Zone Countries
of which :
2.2 1.4 7.1 8.1 29808 9164 Germany
2.6 2.6 3.7 4.1 15589 4698 Italy
2.1 1.8 3.3 4.1 13761 4675 France
33.2 27.4 139186 31045 Other countries
419042 113240 Total
* Provisional Data.
Source: Central Department of Statistics and Information, World
Economic Outlook Database, Sep 2011 - IMF.
6. Indicators of the General Trend and Fluctuation in Inflation Rates
Measuring the general price level contributes to sound and appropriate
decision-making at the micro level (individuals and businesses) and at the macro level
in terms of public policies. It is imperative, therefore, to follow up the overall trend of
volatility in prices and observe the volatility range, particularly at the medium and
long terms. This section of the report highlights briefly the general trend and degrees
of volatility in the inflation rates in the Kingdom (according to the general cost of
living index). Table (8) provides descriptive statistics on inflation rates for the period
(April, 2011 – March, 2012) and the period (April, 2006 – March, 2011), while table
(9) shows descriptive statistics for quarterly inflation rates during the period from the
first quarter of 2007 to the first quarter of 2012.
As shown in Table (8), the arithmetic average of inflation rate decreased from
5.5 percent during the last five years to 5.1 percent during the twelve-month period
07
ended in March, 2012. This was due to decreases in the arithmetic average of
inflation rate of all groups except the group of goods and other services, the group of
renovation, rent, fuel, and water, and the group of food and beverages.
Table 8: Descriptive Statistics for Monthly Inflation Rates
(%) Monthly Inflation Rates per Group*
Goods
and
other
Services
Education
and
Entertainment
Transport
and
Telecomm-
unication
Medical
Care
House
Furnishing
Renovation
Rent, Fuel
and Water
Fabrics,
Apparel
and
Shoes
Food and
Beverages
General
Index
Apr 2006 - Mar 2011
7.3 1.0 -0.2 2.4 4.1 10.5 -0.6 7.0 5.5 MEDIAN
8.0 0.9 0.6 1.6 3.0 10.3 -0.5 6.5 5.1 Median
3.3 0.9 2.5 2.4 4.3 5.5 1.3 4.4 2.6 Standard Deviation
14.7 3.2 2.6 7.7 14.7 19.8 1.8 16.0 11.1 Maximum Amount
1.2 -0.4 -5.4 -0.2 -0.7 0.7 -3.5 -0.3 2.1 Minimum Amount
13.5 3.6 8.0 7.9 15.4 19.1 5.3 16.3 9.0 Range
Apr 2011- Mar 2012
8.8 2.2 2.2 0.5 1.4 8.0 1.1 4.8 5.1 MEDIAN
8.1 2.3 2.3 0.2 1.3 7.9 0.7 5.0 5.2 Median
1.7 1.3 0.3 0.7 1.7 0.7 1.1 0.9 0.3 Standard Deviation
12.3 3.6 2.5 1.5 3.2 9.3 2.7 6.0 5.4 Maximum Amount
7.1 0.9 1.5 -0.1 -0.8 7.0 -0.3 3.2 4.6 Minimum Amount
5.2 2.7 1.0 1.6 4.0 2.2 3.0 2.7 0.8 Range
* A month against a
corresponding month
in the preceding year.
Table (9) shows that the quarterly inflation rate averaged 5.9 percent of the
general index with a standard deviation of 2.2 and a range of 7.8 (The range is the
difference between the maximum and the minimum values). Most of the volatility in
the quarterly inflation rates during the period from the first quarter of 2007 to the
first quarter of 2012 was ascribed to increases in the arithmetic averages of the group
of renovation, rent, fuel and water (average = 6.4 with a standard deviation = 4.7 and
range = 14.9) and the group of food and beverages (average = 6.8 with a standard
deviation = 0.2 and range = 15.6) while they decreased in the other groups.
08
Table 9: Descriptive Statistics for Quarterly Inflation Rates
(%) Quarterly Inflation Rates per Group
Goods
and
other
Services
Education
and
Entertainment
Transport and
Telecomm-
unication
Medical
Care
House
Furnishing
Renovation
Rent, Fuel
and Water
Fabrics,
Apparel
and Shoes
Food and
Beverages
General
Index
1st Quarter 2007 -
1st Quarter 2012
7.3 1.3 0.8 2.1 4.1 11.3 -0.3 6.8 5.9 MEDIAN
7.7 1.1 1.1 1.3 3.2 9.6 -0.3 5.7 5.3 Median
3.0 1.1 1.5 2.5 4.2 4.3 1.5 4.3 2.2 Standard Deviation
12.9 3.5 2.3 7.6 14.4 18.9 2.6 15.8 10.8 Maximum Amount
2.8 -0.3 -4.4 -0.2 -0.5 4.0 -3.1 0.2 3.0 Minimum Amount
10.2 3.8 6.8 7.8 14.9 14.9 5.7 15.6 7.8 Range
09
Charts (7 and 8) show inflation rate (quarterly in the former charter and
monthly in the latter) and its general trend, measured by the moving average of
inflation rate (every four quarters for the quarterly, and every 12 months for the
monthly).
7. Factors affecting Inflation Rate:
A number of factors affect the domestic inflation rate, and their influence
differs from one period to another. Table (10) shows the relative changes of the most
significant domestic factors affecting the inflation rate in the Kingdom, which are
0.00.30.60.91.21.51.82.12.42.73.03.33.6
Chart 7 : The General Trend in Quarterly Inflation Rates
Moving Average 4 Quarters Quarterly Inflation Rate of the General Index (%)
-0.5-0.20.00.20.50.70.91.11.41.61.8
Chart 8 : The General Trend in Monthly Inflation Rates
Moving Average 12 Months Monthly Inflation Rate of the General Index (%)
21
concentrated on the demand side, resulting from an increase in the government and
private expenditure, and its effect on the level of liquidity. Government expenditure
grew by 23.0 percent in 2011 compared to a growth rate of 9.6 percent in 2010. Money
supply (M3) increased by 3.8 percent in the first quarter of 2012 compared to the
fourth quarter of 2011, registering an annual increase of 10.5 percent in the year ended
with the fourth quarter of 2011, against an annual increase of 5.00 percent in the
corresponding quarter of 2010 and 10.7 percent in the year ended with the fourth
quarter of 2009.
Table 10 : Most Significant Factors Affecting the Inflation Rate in the Kingdom
% change of
1st quarter 12
against
corresponding
quarter of
previous year
%
Change
of 1st
quarter
12
against
4th
quarter
11
2011 2010 2009 2008 2007 2006 2005
10.5 3.8 13.3 5.0 10.7 17.6 19.6 19.3 11.6 (Money Supply (M3
- - 26.4 9.6 14.7 11.5 18.5 13.5 21.5 Government Expenditure
- - 2.82 19.7 -
2081 2.8. .81 0.81 2.80 GDP Growth Rate:
- - 14.2 8.6 3.1 8.7 8.3 7.9 7.8 - Private Sector
- - 14.5 9.6 13.6 5.4 3.1 10.7 12.5 - Government Sector
(-) Not Available.
Source: SAMA, Ministry of
Finance and Central Department of
Statistics and Information
As for the activity of the private and public sectors, the private sector's GDP at
current prices recorded a growth rate of 14.2 percent in 2011, while the growth rate of
the public sector was 14.5 percent during the same year.
20
Chart (9) indicates the relationship between quarterly inflation rates, growth in
money supply and change in oil prices.
8. Inflation Projections for the Second Quarter of 2012
The inflation rate recorded an annual rise of 5.4 percent in the first quarter of
2012 compared to the corresponding quarter of the preceding year. The average
annual inflation in 2011 stood at 5.0 percent compared to 5.3 percent and 5.1
percent in 2010 and 2009 respectively.
The level of inflationary pressures in the Saudi economy was continued during
the first quarter of 2012, but with low trend compared to the preceding quarter. The
quarterly inflation rate stood at 0.6 percent in the first quarter of 2012 against 1.5
percent in the fourth quarter of 2011. This was due to an increase in inflation rates of
the group of renovation and rent, the group of fabrics, clothing and footwear, the
group of home furnishing, the group of food and beverages, the group of education
& entertainment, and the group of transport and telecommunication compared to
their levels recorded during the fourth quarter of 2011.
According to the IMF's latest data for April 2012, the growth of the global
economy is witnessing a gradual recovery from the effects of financial crises
witnessed by the euro zone. It is also moving to a relative stability in public finances
in other areas of the world. Inflation rates in developing and emerging economies are
expected to decline to 5.9 percent in 2012 compared to 7.5 percent in 2011. Inflation
-15.00
-10.00
-5.00
0.00
5.00
10.00
15.00
1st Q. 2011 2nd Q. 2011 3rd Q. 2011 4th Q. 2011 1st Q. 2012
% Chart 9 : Comparison of Quarterly Inflation Rates, Growth in Money
Supply (M3) and Oil Prices
Change in Money Supply (M3) Change in Price of Arabian Light crude oil Quarerly Inflation Rate
22
rate in advanced economies was also expected to decline to 1.4 percent in 2012
compared to 2.6 percent in 2011.
According to available data of the Food and Agriculture Organization of the
United Nations (FAO), the FAO’s Index of the food prices stood at 216 points in March
2012, which was slightly higher than its level in February 2012, which stood 215
points. With the exception of the groups of dairy and sugar, all items recorded
increases in their levels in March 2012.
9. Conclusion
This report has reviewed the historical and current performance of inflation
rates in the Kingdom up to the end of the first quarter of 2012 based on the data
issued by the Central Department of Statistics and Information on retail consumer
prices (the General Cost of Living Index), wholesale prices (wholesale price index), as
well as the prices of commodities produced domestically measured by the deflators
of the oil and the non-oil sectors. In addition, it has reviewed the most important
factors affecting inflation rates. Available data mentioned earlier show expected
continued domestic inflationary pressures, especially in the group of renovation and
rent, the group of food and beverages and the group of goods and other services
during the second quarter of 2012.