* February rate edges up to 5.4 pct from 5.3 pct
* Housing costs suggest new supply not yet on line
* Analysts expect further rise in rentals; demand strong
* Data unlikely to prompt any change in monetary policy
* But follows news bank loan growth highest since May 2009
By Asma Alsharif
JEDDAH, Saudi Arabia, March 11 Saudi
Arabia's annual inflation rate edged up to a 14-month high of
5.4 percent in February, mainly because of higher food and
housing costs, state news agency SPA reported on Sunday.
Quoting data from the Central Department of Statistics, the
agency said consumer prices increased 0.3 percent from the
previous month in February after a 0.1 percent rise in January.
Food prices climbed 0.5 percent and housing 0.7 percent.
The rise in the annual inflation rate was minor, from 5.3
percent in January, and it is not expected to prompt any
tightening of Saudi monetary policy. Inflation is far below a
record high of 11.1 percent hit during an oil boom in July 2008.
The central bank said last month that it expected relative
price stability or even a slight decline in inflationary
pressures in the near term.
Nevertheless, the latest data underlined how strong economic
growth in the country, on the back of high oil prices and heavy
government spending, was creating conditions for inflation.
"The concern with the new numbers is the big jump in rent
again...in year-on-year we are at the highest since May 2010,"
said Paul Gamble, head of research at Jadwa Investment.
"That is something to watch out for. It suggests that new
property promised by the government is not going on stream and
also that demand is rising."
Saudi Arabia's growing population of 27 million, most of
whom are under the age of 30, faces a housing shortage; last
year the government announced plans to spend $67 billion to
build 500,000 new homes over several years.
"Now we expect to see some increase in housing costs as
economic activity recovers...Probably we can expect rentals to
contribute more to inflation with the overall economic recovery
and because demand/supply is still very tight," said Jarmo
Kotilaine, chief economist at NCB Capital.
In other signs of inflationary pressure, bank lending to the
private sector rose 11.7 percent in January, its fastest rate
since May 2009; it accelerated from 10.6 percent in December
2011. The stock market has jumped 17 percent so far this
year with trading volumes running at two or three times last
The largest Arab economy expanded by an officially estimated
6.8 percent in 2011; it is forecast by a Reuters poll of
analysts to grow 4.0 percent this year, but that estimate could
be exceeded if oil prices stay high and Saudi Arabia produces
more oil to offset part of the supply lost because of
international sanctions against Iran.