Kuwait inflation up 3pc in June
Kuwait, August 28, 2013
The annual inflation in Kuwait went up by three per cent y/y in June, similar to the increase in May mainly due to a jump in the prices of non-food components and housing services, said a report.
Inflation in the food component slowed in June, but this was offset by an increase in price inflation in housing services as well as in furnishing and household maintenance, among other components, stated the National Bank of Kuwait in its review.
With some non-food components edging higher, core CPI went up by 2.4 per cent y/y in June, from 2.1 per cent in May, the report stated.
Inflation in housing services reached 4 per cent y/y in June, from 3.2 per cent in May. Housing services were the largest source of upward inflationary pressure in June, though inflation in this component should see little movement for the 2 months following June, as most of its sub-components are not updated monthly.
Rent, which makes up most of this component, was up by 4.5 per cent y/y in June, from 3.6 per cent in May. Anecdotal evidence points to increased pressure on rents. If such pressures were to materialize in the index, they could easily push inflation higher, as the housing component makes up 29 per cent of the CPI, the top Kuwaiti lender said in the report.
Prices in the furnishing and household maintenance component went up by 2.7 per cent y/y in June, from 2.2 per cent in May. This also contributed significantly to the upward pressure on the CPI, as the component is the third largest in the index, making up 11 per cent of the general index, the report stated.
But the component has been relatively stable in recent months, averaging 2.4 per cent in 1H2013, below its 2011 highs, it added.
Another source of downward inflationary pressure was transport, where prices went up 1.4 per cent y/y in June, down from 1.7 per cent in May. The easing came from lower inflation (or deflation) in some sub-components, such as the purchase of and repair of personal vehicles.
According to NBK, miscellaneous goods and services inflation stood at 2.9 per cent in June, down from 4.3 per cent in May. The component had previously been a source of upward pressure on general inflation, though it had an opposite effect in June.
The 1.4 percentage point drop in the June rate came from lower inflation rates in some personal effects items, such as gold jewellery (up 1.6 per cent y/y in June, from 15.6 per cent in May), it stated.
NBK said the country's inflation was likely to remain contained for the remainder of this year, averaging around 2.5 per cent for 2013 as a whole (similar to its the 2013 first half average).
"Key to this is an expected further decline in food price inflation, linked to international food price trends. This should broadly offset what we see as a slight increase in core inflation as the year goes on, including potentially higher housing costs," the top lender said in the report.
"Overall, we are still some way from price pressures becoming a major concern for the authorities, who are likely to retain a pro-growth policy bias," it added.-TradeArabia News Service