Kuwait's annual inflation rate eased to 2.7 per cent in April slowing down slightly from three per cent y/y in March, said a report.

The cool down in inflation, which rose to three per cent in March, was mostly attributed to the ongoing slowdown in food inflation as well as a fall in core (i.e. excluding food) inflation, stated the National Bank of Kuwait (NBK) in its report.

Core inflation fell from 2.8 per cent y/y to 2.6 per cent y/y in April, and inflation excluding both food and housing also continued to decelerate into April.

However, food prices are expected to climb later this year, which along with a projected rise in core pressures (especially in the housing sector and its related components), are set to pressure the overall inflation rate up, toward 3 per cent, said the country's top lender.

Food price inflation slowed down from 3.6 per cent y/y in March, to 2.9 per cent in April. Food price inflation has remained on a downward trend since the middle of last year, it stated.

Until recently, CPI’s core components were on the rise and the downward trend in food inflation helped keep the overall inflation rate in check. In April we saw core inflation also slow down; and excluding both food and housing, CPI inflation decelerated again in April, to 1.6 per cent y/y from 1.9 per cent y/y in March.

However, the recent rise in international food prices may subsequently push domestic food inflation up, at least for some time, said the NBK in its report.

Inflation in the biggest component of the CPI – rented housing – came in at 4.6 per cent y/y, almost unchanged from March. Note that the housing component is surveyed/updated only once every three months. Housing rental inflation is currently just 0.2 per cent shy of the peak rate seen last October, it added.

According to NBK, the pressures in the three other major components of the CPI – clothing, furnishing and ‘other goods & services’ appear to have subsided of-late.

Inflation in the clothing component took a slight dip in April, whilst both the furnishing and ‘other’ (which remains in decline) segments witnessed some stabilization. However, the robust level of activity in the housing sector is expected to drive this figure higher, said the NBK report.

With housing inflation expected to remain firm, overall inflation is expected to edge toward three per cent.

In the meantime domestic food inflation is expected to climb somewhat, given the recent trend in international food prices, and so is the furnishing component, given its rather strong correlation with housing inflation, it stated.

The headline inflation is thus expected to average near three per cent in 2014, the report added.-TradeArabia News Service