RIYADH: Saudi Arabia’s annual consumer inflation edged up to 2.2 percent in May, with rental prices emerging as the principal driver behind the increase.  

The uptick was fueled by an 8.1 percent rise in housing rents, including a 7.1 percent increase in villa rental prices, according to the latest data released by the General Authority for Statistics. 

While inflation across the Middle East and Central Asia shows signs of easing, country-level dynamics remain mixed, with Egypt reporting 16.8 percent in May, Jordan at 1.98 percent, Saudi Arabia holding steady at 2.2 percent, and Dubai’s rate moderating to 2.3 percent in April. 

In a release, GASTAT stated: “On a monthly basis, the consumer price index remained stable in May 2025, recording a 0.1 percent increase compared to April 2025.” 

It added: “This was mainly due to a 0.3 percent rise in housing, water, electricity, gas, and other fuels section, driven by a 0.4 percent increase in actual housing rent prices.” 

On a month-to-month basis, the consumer price index recorded only a modest increase, signaling relative price stability.  However, key segments such as housing, food and beverages, and personal goods and services contributed to the mild inflationary pressure, partially offset by declines in transportation and household furnishings. 

The Kingdom’s inflation dynamics in May highlight the ongoing strain in the housing sector, where rising rental costs have been the most significant inflationary force.  

The housing, water, electricity, gas, and other fuels category saw a year-on-year increase of 6.8 percent, driven primarily by the sharp climb in actual rents.  

This sector carries the greatest weight in the consumer basket, representing 25.5 percent of the overall index, which significantly increases its impact on the national inflation rate. 

GASTAT stated that “rents paid for housing in May 2025 increased by 8.1 percent, attributed to a 7.1 percent increase in rental prices for villas,” underscoring the persistent demand pressures in the residential rental market. 

As urban development and population growth continue, rental affordability may remain a critical issue for policymakers. 

The upward trend in rents is being driven by a complex mix of structural and economic factors.  

Residential demand in Saudi Arabia’s largest cities, particularly Riyadh and Jeddah, has increased as urban populations grow and Vision 2030 development projects attract investment.  

Major initiatives such as NEOM and Jeddah Central are fueling this trend. At the same time, housing supply has not kept pace, especially in the rental market, despite a pipeline of 3.5 million residential units.  

Construction activity remains below the level needed to stabilize prices. Rising costs for building materials and labor have also pushed up developers’ expenses, contributing to higher rents.  

These dynamics reflect the Kingdom’s rapid urban development under Vision 2030, which aims for a 70 percent homeownership rate and a diversified economy.  

However, as mortgage-backed homeownership increases, rental demand remains strong, continuing to perpetuate upward pressure on rents. 

In addition to housing, food and beverage prices rose by 1.6 percent compared to May 2024, largely driven by a 2.8 percent increase in the prices of meat and poultry. 

These gains coincide with trends observed in the wholesale sector, where the prices of agricultural and fishery products jumped by 4.4 percent over the same period.  

Agricultural products alone posted a 6.2 percent rise, and fishing products increased by 6.1 percent, indicating upstream cost pressures that are gradually being passed on to consumers. 

The personal goods and services category also saw a notable annual rise of 4 percent, led by a 24.4 percent increase in prices of jewelry, watches, and precious antiques.  

This increase, while potentially reflecting stronger discretionary spending, also suggests elevated pricing in the luxury goods segment. Meanwhile, catering services drove a 1.8 percent increase in restaurant and hotel prices, adding modestly to overall inflation. 

Education and health costs recorded limited inflation, with education rising by 1.3 percent, primarily due to a 5.6 percent increase in non-university post-secondary costs.  

Health-related prices remained broadly stable, providing some relief in an otherwise inflationary environment. 

However, certain sectors experienced deflationary pressures. Furnishings and household equipment prices dropped by 2.5 percent year on year, largely because of a 4 percent decline in furniture, carpets, and flooring prices. 

Clothing and footwear prices fell by 0.9 percent, driven by a 2.7 percent reduction in footwear prices.  

Transport costs also decreased by 0.8 percent, as the price of vehicle purchases dropped by 1.9 percent. 

These categories helped counterbalance some of the broader upward pressures on the index. 

On a monthly basis, the CPI’s 0.1 percent increase was relatively muted. Food and beverage costs rose by 0.1 percent, while personal goods and services increased by 0.5 percent, and tobacco prices ticked up 0.2 percent. 

However, several categories saw declines: transportation fell 0.2 percent, recreation and culture decreased 0.1 percent, furnishings dropped 0.7 percent, clothing and footwear slipped 0.4 percent, and communication declined 0.1 percent.  

The prices of education, health, and restaurants and hotels showed no significant month-over-month changes. 

Wholesale Price Index 

The broader inflation picture is reinforced by wholesale price data, which showed a 2 percent year-on-year increase in the wholesale price index in May. 

The WPI tracks the prices of goods before they reach the retail level, offering insights into future consumer price trends.  

The rise was mainly driven by the same categories that affected the CPI: agriculture and fishery products, which increased by 4.4 percent, and other transportable goods, excluding metals and machinery, which rose by 4.3 percent. 

“This increase was primarily driven by an 8.2 percent rise in the prices of refined petroleum products,” the WPI report stated.  

Furniture and other transportable goods not elsewhere classified recorded a sharp 9 percent increase, further signaling inflationary pressures in non-essential consumer goods. 

Conversely, wholesale prices of metal products, machinery, and equipment fell by 0.3 percent, affected by a 5.1 percent decline in the prices of radio, television, and communication equipment, as well as a 3.3 percent decrease in general-purpose machinery prices.  

The prices of ores and minerals dropped by 1.5 percent, reflecting a general cooling in commodity prices, mainly due to a reduction in the prices of stone and sand. 

Monthly changes in the WPI were largely flat, recording no overall change from April.  

A slight 0.1 percent rise in the prices of transportable goods and ores was balanced out by a 0.3 percent decline in agricultural products and a 0.2 percent fall in metal and digital machinery prices.