Inflation in consumer prices in the State of Kuwait rose to 3.1% year-on-year (y/y) in June, mainly on the back of an uptick in housing and restaurant/catering prices (Chart 1), according to a report released by the National Bank of Kuwait on Monday. Core inflation (which excludes food prices) climbed to 3.5% y/y during the same period, as inflation in housing services, clothing & footwear, healthcare and restaurants & hotels saw some upward momentum.
Food inflation maintained its downward trend in June, which helped keep overall inflation in check, the report said forecasting ongoing softness in food inflation to persist and inflation in most other components to remain moderate.
Annual average inflation is projected to come in at a decent 3.0% in 2016, marginally lower than the 3.3% recorded in 2015.
Food price inflation continued to soften in June on weak growth in global food prices. Local food inflation eased for the fifth consecutive month in June to 1.2% y/y. Inflation in international food prices was at a mere 0.3% in June.
The softness in local food inflation has also been visible in weak non-durable goods inflation, which has decelerated sharply this year. Inflation in this segment slowed from 1.8% y/y in May to 1.1% y/y in June.
On the surface, inflation in housing services showed firmer numbers in 2Q16 in spite of expectations for a more moderate pace amid a cool real estate market. Housing inflation (primarily housing rents), which is updated quarterly, accelerated from 6.3% y/y in March to a record high 7.3% y/y in June. The housing numbers this June were exaggerated by a basis effect from June 2015.
While the basis effect could linger for another two or three months, momentum in housing inflation is expected to continue easing.
Furnishings & household maintenance inflation remained steady, while inflation in clothing & footwear saw a slight uptick. Inflation in furnishings remained steady at around 3% y/y for the fourth consecutive month in June.
Inflation in clothing & footwear costs rose to its highest reading in over a year during the same period, but it still remained weak at 0.3%. The stronger dinar and more frequent and longer seasonal promotions have weighed down on costs in this segment.
Inflation in durable and semi-durable goods appears to be trending higher, but still remains relatively soft. Inflation in durable goods and semi-durable goods stood at 0.8% y/y and 0.9% y/y, respectively in June. The inflationary trends in the ˜furnishings' and 'clothing' segments are somewhat indicative of the inflationary trends in durable goods and semi-durable goods. They have almost been moving in line with each other.