Slight Acceleration of Saudi Inflation with Rising Transportation and Food Prices

SadaNews - The transportation and food sectors have strengthened their contributions to driving inflation in Saudi Arabia during May 2026, at a time when the pressures resulting from housing costs, which have been the main driver of prices over the past two years, began to gradually decline.

Data from the General Authority for Statistics released today showed that the annual inflation rate in the Kingdom rose to 1.8% in May 2026, compared to 1.7% in April, remaining within low levels compared to many economies in the region and the world, despite the ongoing uncertainty related to geopolitical developments and fluctuations in energy prices.

Decline in Housing Impact

This limited increase reflects a gradual shift in the sources of price pressures within the Saudi economy. After housing and rental costs dominated the inflation trajectory in the past, other groups, primarily transportation and food, began to play a larger role in supporting the pace of price increases.

The transportation group, the third largest component of the Saudi consumer basket, recorded an annual growth rate of 1.5% during May, compared to 1% in April, supported by rising operational costs and services related to transportation. The growth in food and beverage prices, which has the largest weight in the consumer basket, accelerated to 0.7% compared to 0.6% in the previous month, reflecting continued pressures on the prices of some essential food items.

In contrast, the growth of housing, water, electricity, gas, and fuel prices, the second largest components of the consumer basket, slowed to 3.7% year-on-year during May, compared to 3.8% in April, contributing to limiting the overall inflation acceleration rate.

This comes at a time when previous data indicated that residential rents have been the largest contributor to Saudi inflation in recent years, driven by increased demand for housing, especially in Riyadh and Jeddah, alongside population growth and the acceleration of economic activity and major development projects associated with "Vision 2030."

Over the past years, Saudi Arabia has maintained one of the lowest inflation rates among the G20 countries, benefiting from domestic energy price support, the stability of the riyal's exchange rate linked to the dollar, and the strength of the supply of essential goods. Inflation has also remained in recent months close to pre-escalation levels of regional tensions, ranging between 1.7% and 1.8% since the beginning of the year, indicating limited transmission of external shocks to domestic prices so far.

The persistence of inflation near the 2% level allows policymakers in the Kingdom a comfortable margin to maintain price stability while also supporting economic activity, especially with continued government spending on major projects and the acceleration of growth in non-oil sectors, which have become the main engine for the Saudi economy in its efforts to diversify income sources away from oil.