Kuwait's inflation slowed to a 2.3 per cent year-on-year (y/y) in January, down from 2.6 per cent the previous year owing to a sharp drop in food prices, according to a report. 

 

The deceleration stemmed mostly from a fall in the y/y rate for food prices, with other components – namely ‘other goods and services’ and ‘clothing and footwear’ – playing a smaller role in the slowdown, said the National Bank of Kuwait in its review. 

 

The consumer price index (CPI) eased a little in January down from 2.9 per cent average for the previous year 2012, it stated. 

 

The core inflation, which excludes food and beverage prices, recorded 2.6 per cent y/y in January, similar to December’s 2.7 per cent.

 

The core inflation measure outpaced its general counterpart for the second consecutive month, reflecting a change in the sources of inflationary pressures. Previous major sources of upward pressure such as food prices have become a softening force and have been replaced by other components.

 

The food prices were up a mere one per cent y/y in January, their smallest rise in recent years and a drop from 2.1 per cent y/y in December, said the top Kuwaiti lender in its report. 

 

The slowdown in this component alone pushed the overall y/y inflation rate down by 0.2 percentage points. The deceleration in January came mostly from two major sub-components: fruits and vegetables prices were up 4.6 per cent y/y, a drop from 6.8 per cent in December, while meat, poultry and fish saw a second month of deflation, with prices dropping 1.4 per cent y/y after decreasing by 0.3 per cent y/y in December. 

 

Food prices overall were also down 0.6 per cent m/m, after a similar drop of 0.7 per cent m/m in December, thereport added. 

 

However, the housing costs, which constitute the largest component of the consumer basket, rose 2.4 per cent y/y in January, unchanged from December. 

 

"The component is made up almost wholly (95 per cent) of housing rent, which went up by a similar 2.5 per cent y/y. The remaining 5 per cent of housing services is made up of utilities (water, fuel, and power), which stayed flat y/y, and in fact rarely sees any movement," it stated.

 

Inflation in the transportation and communication segment stood at 2.9 per cent y/y, up from 2.6 per cent in December. The communication part of the component was actually flat y/y, while transportation prices were up 3.3 per cent y/y, with saloon automobile (sedan car) prices increasing by 6.7 per cent y/y, their steepest rise in recent history.

 

At just 2.3 per cent y/y, overall inflation has started 2013 at a relatively subdued level, the top Kuwaiti lender stated in its report. 

 

"Nonetheless, we do expect some modest upward pressure on prices as the year progresses, with inflation averaging 3.5 per cent for the full year. The sources of inflationary pressures could be both international – such as higher food or import prices – and local — such as somewhat higher rents," it added.-TradeArabia News Service