Font Size

- Aa +

Wed 3 Nov 2010 07:43 PM

Font Size

- Aa +

Kuwait Sept CPI hits 18 month high on food, housing

While food and housing cost soared, transport costs were flat for the second month in a row

Kuwait Sept CPI hits 18 month high on food, housing
INFLATION WATCH: Kuwait inflation rose to 5.3% y/y in Sept against 4.4% in Aug (Getty Images)

Kuwait inflation climbed to an 18 month high of 5.3 percent year-on-year in September, mainly driven by soaring food and housing costs, the Gulf Arab country's data showed on Tuesday.

Inflation in the world's fourth largest oil exporter has risen over the past months from a low of 1.6 percent in November 2009 as the oil reliant economy recovers from last year's sharp contraction.

The September rate is the second highest in the Gulf after Saudi Arabia but is still well below a record high of 11.6 percent seen in August 2008. Consumer price growth stood at 4.4 percent in August.

On the month, prices in the OPEC member jumped 1.1 percent following a 0.4 percent rise in the previous month, data from the Central Statistical Office showed.

Senior economist at the National Bank of Kuwait, Daniel Kaye said: "As long as international commodities prices stay reasonably steady, I don't see this as a start of a broader inflationary process similar to the one we had in 2007 and early 2008."

Kaye said: "It is possible that the year-on-year rate of food price inflation would continue rising for another month, but if you look at the broader economy, there aren't many signs of sustained price increases. Inflationary pressures should stay relatively well contained."

Food prices, which account for 18 percent of the Kuwaiti basket, soared by 2.6 percent month-on-month in September, after a 1.2 percent rise in August.

Prices usually rise during the holy month of Ramadan, which ended in mid-September, as families enjoy larger and more elaborate evening meals after the daylight fasting.

Chief economist at Banque Saudi Fransi, John Sfakianakis said: "If they continue on the same path that would cause a little bit of a worry since it is food related and that has a direct impact on the purchasing power of citizens and expatriates alike."

Housing prices, which have the largest weight of 27 percent, rose 1.1 percent in September, after remaining unchanged in August. Transport costs, the third biggest component, were flat for the second month in a row.

Unlike its fellow Gulf Arab oil producers, Kuwait abandoned a dollar peg in favour of a currency basket in 2007 to counter a sharp spike in inflation.

Annual inflation in the UAE edged up to a 16 month high of 1.2 percent in September, data showed this week, but pressures remain more benign there due to the impact of Dubai debt restructuring.

A Reuters poll forecast average inflation in Kuwait at 4.2 percent for the full year of 2010, up from 4.0 percent last year. (Reuters)

 

For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.