Inflation in consumer prices edged higher last August, rising from 3.6 percent year-on-year (y/y) in July to 3.8 percent y/y, the National Bank of Kuwait (NBK) said in on Monday. It attributed the rise mainly to strong gains in food inflation.
According to the NBK's Economic Brief, inflation across all other components either retreated or remained unchanged. Core inflation (excludes food) eased for the first time in almost a year, but still remains relatively high at 3.4 percent. Core inflation has been relatively steady in recent months as inflationary pressures from its components, with the exception of housing, have receded. Slowing inflation in most components and a stronger dinar against major currencies (excluding the US dollar), are expected to limit any further gains in headline inflation. Subsequently, annual consumer price inflation is forecast to average close to 3.5 percent in 2015, the Brief said.
It added that inflation in food prices jumped from 4.1 percent y/y in July to 5.6 percent y/y in August, though global food prices continued to decline. Local food inflation was driven higher by sharp increases in fish prices.
In the meantime, inflation in housing services has been an important source of inflationary pressure over the last 12 months, though we expect that pressure to ease. The housing component rose to a six-year high of 6.5 percent y/y in June.
However, after witnessing strong gains in the last quarter of 2014 and in 1Q in 2015, housing inflation, which is mostly comprised of rents, is expected to ease in the coming months. As for inflation in clothing and footwear, and furnishings and household maintenance, it continued to trend lower in August.
Clothing and& footwear inflation fell further in August, declining by 1.8 percent y/y. Inflation in this component is witnessing a large correction, following a high base around the same period last year. Another factor contributing to the downward trend is the stronger dinar (most goods in this component are imported). Inflation in furnishings and household maintenance also eased, slowing from 4.2 percent y/y in July to 3.8 percent y/y in August.
Inflation in the 'other goods and services' segment maintained its downward trend in August. Inflation in this segment, which includes prices of personal care products and jewelry and certain business charges, is currently seeing some downward correction. The slowdown can also be attributed to the stronger dinar, since most of the items in this segment are imported. Wholesale price inflation has been rather steady since the beginning of 2015, amid stable manufacturing costs and slowing mining and quarrying inflation, the NBK said. The most recent data on wholesale price inflation showed a slight easing to 3.4 percent y/y in June on moderating pressures from the manufacturing, and mining and quarrying components.