Kuwait’s in­fla­tion eases to 3.6%; fuel im­pact sub­sides

Kuwait Times - - BUSINESS -

In­fla­tion in con­sumer prices eased in Oc­to­ber as the ini­tial im­pact of the fuel price hike ebbed. Head­line in­fla­tion edged lower from the one-year high of 3.8 per­cent year-on-year (y/y) in Septem­ber to 3.6 per­cent y/y in Oc­to­ber, as in­fla­tion in most com­po­nents re­mained sub­dued or broadly steady. In­fla­tion ex­clud­ing the im­pact of the Septem­ber fuel price hike has re­mained steady at around 3.1 per­cent y/y. In­fla­tion in 2016 is ex­pected to av­er­age only slightly higher than 2015 at 3.4 per­cent, thanks to down­ward price pres­sures from hous­ing, food, and other im­ported goods. In 2017, in­fla­tion is ex­pected to rise and av­er­age 4 per­cent on fur­ther hikes in reg­u­lated prices.

Af­ter surg­ing in Septem­ber on the back of the fuel price hike, in­fla­tion in the trans­porta­tion sec­tor ap­pears to have stead­ied some­what, at least for now. Af­ter slow­ing since at least 2009 due to softer growth in both car prices and air­fares, in­fla­tion in trans­porta­tion costs re­bounded in Septem­ber, soar­ing to 10.6 per­cent y/y, and kept steady at 10.4 per­cent in Oc­to­ber. The jump came on the back of a 52 per­cent y/y surge in fuel & lu­bri­cant prices, which in turn pushed the costs of trans­port ser­vices (taxi fares in par­tic­u­lar) higher. While prices in this seg­ment ap­pear to have broadly stead­ied in Oc­to­ber, we may still see some up­ward pres­sures in this seg­ment in the short to medium-term as trans­port ser­vices read­just their prices to re­flect the fuel price in­creases.

In­fla­tion in lo­cal food prices main­tained its soft­ness in Oc­to­ber, af­ter it came in at a mere 0.7 per­cent y/y. The seg­ment con­tin­ued to be weighed down by de­clin­ing global food prices. Ac­cord­ing to the Com­mod­ity Research Bureau, in­ter­na­tional prices of com­mod­ity foods slid deeper into de­fla­tion­ary ter­ri­tory af­ter fall­ing by 9.2 per­cent y/y dur­ing the same pe­riod.

In­fla­tion in hous­ing ser­vices eased no­tably in 3Q16 amid a cool­ing real es­tate mar­ket. 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 per­cent y/y in Septem­ber. How­ever, the 3Q16 in­crease was a mere 0.1 per­cent, its weak­est pace in over three years. We ex­pect the mo­men­tum in hous­ing in­fla­tion to con­tinue to ease in the near-to-medium term.

In­fla­tion in both fur­nish­ings & house­hold main­te­nance and cloth­ing & footwear re­mained sub­dued in Oc­to­ber. In­fla­tion in the fur­nish­ings & house­hold seg­ment held steady at 2.1 per­cent y/y, while in­fla­tion in cloth­ing & footwear prices slipped back into neg­a­tive ter­ri­tory for the first time in five months. The soft­ness in this sec­tor may be due to some weak­ness in the con­sumer sec­tor. In­fla­tion in the ‘other goods & ser­vices’ cat­e­gory ticked down­wards. In­fla­tion in this seg­ment, which is mostly com­prised of im­ported goods, such as per­sonal care prod­ucts and jew­elry, eased to 1.5 per­cent y/y in Oc­to­ber. The slow­down in this seg­ment could be ex­plained by the ease in gold price in­fla­tion.

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