“My boss sent me back to return the milk – it’s too expensive,” said the Pakistani driver for a middle-class Saudi family at the checkout counter of the Al-Othaim supermarket. He puts the two-litre pack on the counter and the cashier duly hands him back the seven riyal – less than $2 (£1, €1.4). “It happens all the time now,” the cashier sighs.

A sustained rise in prices for food staples and rents have sent many ordinary Saudis reeling. When dairy producers raised prices by 20 per cent at the beginning of this month, a spontaneous, if patchy, boycott erupted. It may not conform to the image of the oil-rich kingdom but economists say a large section of Saudi society should either be counted as middle class or lower income, and they are affected by the new phenomenon of inflation.

Saudi Arabia is enjoying an unprecedented economic boom fuelled by record oil prices, but inflation is being driven by the global rise in food prices; housing shortages, which have pushed up rents; as well as supply shortages as sectors such as construction witness increased activity to meet the big internal demand.

The latest figures put inflation for December at 6.5 per cent, up half a point from the previous month and a far cry from the 2.2 per cent at the end of 2006.

Food prices may rise again – by as much as 30 per cent this year – according to the ministry of commerce. The situation is exacerbated because Saudis lived through low or zero inflation when the economy virtually stood still after the oil surge of the 1970s and early 1980s.

The price rises have sparked some calls for a revaluation of the riyal or even a severing of the link between the currency and the US dollar, which some blame for the price rises.

In the Al-Malaz neighbourhood where the Al-Othaim supermarket is situated, many may still be able to afford a driver to do their shopping, even if money is tighter. But Faisal Bakhsh, a 28-year-old, newly-married banker who came to pick up a pack of detergent, feels the pressure. He says he has little left every month after spending more than 2,500 riyal ($670, £340, €460) on food and rent. “I thought about waiting to have children but then I might as well leave the country and accept an offer from Dubai or Qatar,” he said.

The banker estimates his salary needs to rise by 20 to 25 per cent to make up for the loss of purchasing power over the past few years. Government employees last received an increase – 15 per cent – in 2005 but wages in the private sector have not grown by the same amount.

If the effects of the price rises are being felt in a middle-class neighbourhood such as Al-Malaz, they are devastating in the poorer quarters of the city. A few beggars lean against the crumbling walls of the neighbourhood next to the Oud cemetery where the kings of Saudi Arabia are buried. They are wrapped in scarves and cloaks against the cold, slicing wind.

“I am waiting here for a rich man to give me some money,” says beggar Abu Ali. He says he has been unemployed for 20 years, has a family of 10 to feed and can no longer live on the government handouts that have in previous years kept him afloat. “The last increase was four years ago and it was not enough,” he said. “I have changed home a lot of times [in the past three years] and every time the rent became more expensive and the flats smaller.”

The dun-coloured houses of the Oud neighbourhood seem to be under constant threat of being reabsorbed by the desert, a world away from the gleaming, futuristic towers of the city centre. But talk among the lunch crowd in the luxury Kingdom shopping mall is also about the price increases.

“We import everything here in Saudi Arabia and it has all become more expensive,” says Ibrahim Abdel-Rahman, a 25-year-old banker. Like many others he blames the riyal peg to the dollar. “But the Americans will not let us drop that.”