Kuwait consumer inflation holds steady
Inflation in consumer prices eased for the second consecutive month in November, according to the latest figures from National Bank of Kuwait (NBK).
Headline inflation came in at 3.4 per cent year-on-year (y/y), versus the 3.6 per cent reading in October, as inflation in most components slowed or remained broadly steady. Core inflation, which excludes food prices, also subsided but remained at a multi-year high of 4.2 per cent y/y.
Inflation in 2016 is expected to average around 3.4 per cent, NBK wrote in a recent economic update. Price growth was mostly unchanged from the 2015 pace as the effects of higher fuel prices were largely offset by downward price pressures from housing, food and other imported goods. In 2017, inflation is projected to climb to four per cent as the government introduces higher electricity and water tariffs from May 2017.
Inflation in the transportation sector appears to be holding steady for the time being, NBK said. Inflation in this segment jumped to around 10 per cent y/y in September and has remained steady around that mark in October and November.
The jump stemmed from the 50-60 per cent hike in fuel prices that month, which pushed transport service costs (taxi fares in particular) 8 higher. “We may see some upward pressures in this segment in the short to medium-term as transport services readjust their prices to factor in the fuel price increases,” NBK said.
Inflation excluding fuel prices remained broadly stable at around 3 per cent. Also note that car prices fell on the month and were 2 down 1.8 per cent y/y.
At 0.2 per cent y/y, inflation in local food prices has been weak as global food prices receded further into deflationary territory. According to the Commodity Research Bureau, international prices of commodity foods fell by 9.7 per cent y/y during the same period.
Inflation in housing services has eased markedly amid a cooling real estate market, NBK wrote. After trending upwards for almost a year, housing inflation, which is comprised primarily of housing rents and is updated quarterly, steadied, at a still high, 7.4 per cent y/y in September. However, the 3Q16 increase was a mere 0.1 per cent, its weakest pace in over three years. NBK expects the momentum in housing inflation to continue to ease in the near-to-medium term.
Inflation in the retail sector continued to be weighed down by softer consumer demand and a stronger dinar. This was reflected in the furnishings & household maintenance, clothing & footwear and other goods & services segments.
Inflation in the furnishings & household segment was unchanged at 2.1 per cent y/y in November, while clothing & footwear price inflation fell at a faster pace of 1.1 per cent y/y. Inflation in the ‘other goods & services’ category, which is mostly comprised of imported goods, such as personal care products and jewelry, receded for the second straight month in November, to 0.9 per cent y/y.