KUWAIT CITY: Headline inflation rose to 3.8% year-on-year (YoY) from 2.9% in August, reports NBK. Excluding the increase in fuel prices, the rate of inflation remained relatively steady at around 3.0% YoY. For the month CPI jumped 1%, it would have been flat to down without the rise in fuel prices. Food inflation continued to be soft thanks to declining international food prices. Inflation in housing services, mostly housing rents, stabilized in September after trending upwards for almost a year, in tandem with weakness in the real estate market. We expect headline inflation to log in an annual average inflation rate of 3.4% in 2016, just marginally higher than the 3.3% reading in 2015.
Inflation in local food prices remained weak in September as global food prices declined further (Chart 2), coming in at a mere 0.8% YoY during the month. Per the Commodity Research Bureau, international prices of commodity foods fell for the third straight month in September, declining by 6.7% YoY.
Inflation in local food prices remained weak in September as global food prices declined further (Chart 2), coming in at a mere 0.8% YoY during the month. Per the Commodity Research Bureau, international prices of commodity foods fell for the third straight month in September, declining by 6.7% YoY.
Inflation in non-durable goods witnessed a spike in September on the back of the hike in fuel prices. The segment had been trending lower since the beginning of 2016 in-line with softer food price growth. NBK expects non-durable goods inflation to subside once again as the effect of the one-off hike on fuel costs fades reports the bank.
Inflation in housing services saw its weakest month-on-month increase in over three years in 3Q16, amid a cooling real estate market. After trending upwards for almost a year, housing inflation, which is comprised primarily of housing rents and is updated quarterly, steadied, at a still high, at 7.4% YoY in September. However, the monthly (and quarterly) increase was up by a mere 0.1%, reflecting a softer housing market. We expect the momentum in housing inflation to continue to ease in the near-to-medium term.
Inflation in both furnishings and household maintenance and clothing and footwear slowed in September. Inflation in the furnishings and household segment eased from 3.0% YoY in August to 2.1% YoY in September. Clothing and footwear inflation slowed from 1.3% YoY to 0.8% YoY during the same period as the upward pressures stemming from the summer holiday season and preparations for the new academic year subsided.
The bank says it continues to see some upward inflationary pressures in this segment in the short to medium-term as we see more transport services readjust their prices to reflect the fuel price increases. “Inflation in the wholesale price index may continue to see some upward pressures from the manufacturing sector in the near to medium-term. However, the ongoing weakness in the agriculture, livestock and fishing prices may help cap some of that upward inflationary pressure. This could help keep any significant inflationary gains in the consumer price index at bay over the medium term,” it notes.
The unexpected election of Donald Trump as US President has sparked increased volatility and uncertainty in global markets this week. A Trump victory initially triggered a knee-jerk collapse in stock market futures and a surge in gold prices as investors fled to haven assets, but since then, global equity and commodity markets have registered mixed performances.
