Kuwait in­fla­tion eases to 3.1% in Septem­ber

Kuwait Times - - BUSINESS -

KUWAIT: In­fla­tion in con­sumer prices slowed in Septem­ber, from 3.8 per­cent year-on-year (y/y) in Au­gust to 3.1 per­cent y/y, as in­fla­tion in most of its com­po­nents, in­clud­ing hous­ing, re­treated. Hous­ing in­fla­tion eased for the first time in a year. As a re­sult we saw core in­fla­tion (ex­cludes food) slip from 3.4 per­cent y/y to 2.8 per­cent y/y dur­ing the same pe­riod. Food price in­fla­tion also re­versed its up­ward trend in Septem­ber. Slow­ing in­fla­tion in most com­po­nents and a stronger di­nar against ma­jor cur­ren­cies (ex­clud­ing the US dol­lar), are poised to keep any sig­nif­i­cant gains in head­line in­fla­tion in check. Thus, we ex­pect an­nual in­fla­tion to av­er­age close to 3.5 per­cent in 2015 and to ease to­wards 3 per­cent in 2016.

In­fla­tion in food prices fell from 5.6 per­cent y/y in Au­gust to 4.4 per­cent y/y in Septem­ber as global food prices con­tin­ued to de­cline. Lo­cal food in­fla­tion re­ceded as fish prices were low­ered fol­low­ing sharp hikes over the sum­mer, and as in­ter­na­tional food prices re­mained in de­cline. Ac­cord­ing to the Com­mod­ity Re­search Bureau’s global com­mod­ity in­dex, in­ter­na­tional food prices were down by around 16 per­cent y/y in Septem­ber. With in­ter­na­tional food prices set to soften fur­ther in the near-tomedium term, up­ward pres­sures on lo­cal food in­fla­tion will be lim­ited.

In­fla­tion in hous­ing ser­vices eased for the first time in a year, sliding from a six-year high in June of 6.5 per­cent y/y to 5.7 per­cent y/y in Septem­ber. Af­ter wit­ness­ing strong gains for a year, par­tic­u­larly in 4Q14 and 1Q15, in­fla­tion in this com­po­nent (mostly com­prised of rents) ap­pears to have peaked and we may see it con­tinue to soften in the months ahead.

In­fla­tion in cloth­ing & footwear, and fur­nish­ings & house­hold main­te­nance con­tin­ued to edge lower in Septem­ber. Cloth­ing & footwear in­fla­tion fell for the sixth con­sec­u­tive month in Septem­ber. In­fla­tion in this com­po­nent con­tin­ues to see a large cor­rec­tion, fol­low­ing a high base around the same pe­riod last year. The stronger di­nar is also help­ing keep in­fla­tion­ary pres­sures down in this com­po­nent (most goods in this com­po­nent are im­ported). In­fla­tion in fur­nish­ings & house­hold main­te­nance slowed from 3.8 per­cent y/y in Au­gust to 2.6 per­cent y/y in Septem­ber.

In­fla­tion in the ‘other goods & ser­vices’ seg­ment also re­ceded fur­ther in Septem­ber. In­fla­tion in this seg­ment, which in­cludes prices of per­sonal care prod­ucts and jew­elry and cer­tain busi­ness charges, is wit­ness­ing a down­ward cor­rec­tion. The slow­down can also be ex­plained by the stronger di­nar, as most of the items in this seg­ment are im­ported.

Whole­sale price in­fla­tion eased in the third quar­ter of this year, mainly as up­ward in­fla­tion­ary pres­sures from its man­u­fac­tur­ing com­po­nent sub­sided. In­fla­tion in the whole­sale price in­dex (WPI) fell from 3.4 per­cent y/y in June (its last up­date) to 2.6 per­cent y/y in Septem­ber, as a slow­down in in­fla­tion in its man­u­fac­tur­ing com­po­nent off­set in­fla­tion­ary gains in its agri­cul­ture, live­stock & fish­ing and min­ing & quar­ry­ing com­po­nents. WPI in­fla­tion is up­dated once ev­ery quar­ter. The agri­cul­ture, live­stock & fish­ing com­po­nent gained some ground in 3Q15 on the back of a hike in fish & seafood prices dur­ing the same pe­riod. How­ever, in­fla­tion in this seg­ment is forecast to sub­side in 4Q15 af­ter fish & seafood prices were low­ered.

In­fla­tion in the WPI com­po­nents is forecast to be mod­er­ate in the near-to-medium term. This will help keep in­fla­tion in the con­sumer price in­dex in check and lead to an an­nual av­er­age close to our 3.5 per­cent pro­jec­tion in 2015.

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