KUWAIT: Inflation in the consumer price index (CPI) rose slightly from 3.3% year-on-year (y/y) in March to 3.4% y/y in April. The pickup was mainly due to a rise in local food inflation. However, local food inflation remains relatively low and is expected to trend lower, given the continued decline in international food prices. The stronger dinar should also help fend off any significant upward inflationary pressures. We expect overall inflation to average close to 3.5% in 2015.
Core inflation slowed down marginally in April but remains relatively high at 3.7% y/y. Core inflation has been gradually led higher by gains in housing inflation, as well as inflationary gains in the maintenance, domestic & household service and education components. We expect housing inflation to subside slightly in the near-to-medium term; this will offer core inflation some reprieve.
Inflation in the food price index climbed from1.7% y/y in March to 2.3% y/y in April; global food prices fell by 20.6% y/y. The pickup in local food inflation in April was its biggest leap in two years. Having said that however, it remains relatively low. Against a backdrop of falling global food prices, upward pressures on local food inflation and thereby the overall inflation rate, are expected to remain minimal.
Inflation in housing services was unchanged from March at 6.3% y/y. Inflation in this component is reported once every quarter. The next update is due in June. Housing inflation climbed to an almost six-year high in March on the back of healthy demand levels. We expect it to ease later in 2015.
Clothing & footwear costs fell slightly again in April; inflation in furnishings & household maintenance slowed. Clothing & footwear inflation was narrowly lower in April, after falling again by a mere 0.3% y/y. Inflation in this segment has been rather muted for almost a year now; this may be attributed to the high base and stronger dinar (most products in this segment are imported). Inflation in furnishings & household maintenance slowed down from 4.0% y/y in March to 3.7% y/y in April.
Inflation in the ‘other goods and services’ segment was only slightly higher in April at 2.7% y/y. Inflation in this segment, which includes prices of personal care products and jewelry and certain business charges, rebounded from a low base back in April 2014, and has been trending upwards ever since.
