KUWAIT CITY, Jan 29: Inflation in the Consumer Price Index (CPI) ticked up to 2.3% year-on-year (y/y) in November, from 2.1% in October. The slightly higher rate in November came from some month-on-month increases in clothing, household goods and services, and transportation. Although the inflation rate has edged higher in the past 2 months, it remains modest, averaging 3.0% 11 months into the year. Core inflation, which excludes food and beverage prices, stood at 1.8% y/y in November (Chart 1).
Food prices were up 4.0% y/y in November, up from 3.8% in October (Chart 2). The general picture remains similar to the previous month, as most sub-components saw modest increases relative to the sharper rates we saw in 2010 and 2011.
Prices for clothing and footwear climbed 3.7% y/y in November, compared to 3.1% in October. Prices for readymade garments (i.e. store-bought clothing), a sub-component of this segment, went up 5.6% y/y, causing much of the upward inflationary pressure here.
Data for transport and communication prices showed a 2.6% y/y increase. Prices also went up 1.1% m/m, acting as one of the drivers in the slight uptick in the headline inflation rate in November.
Price inflation in this segment came primarily from a 5.5% increase in personal transport equipment (cars).

Prices for “saloon” (sedan) cars went up 5.4% y/y, while price for other vehicles was up 9.3% y/y. It is worth noting here that prior to September 2012, prices of salon cars hadn’t changed in more than 2 years. Higher price pressure in this segment and the clothing segment are likely a reflection of strong and steady consumer spending.
Similar to recent trends, the inflation rate in a handful of the segments remained below the 2% mark. Household goods and services went up 1.9%, up from 1.1% in October and thus also responsible for some of the m/m increase in headline inflation. Similarly, education and medical care also recorded a 1.9% y/y increase, close to its 1.7% in October. In general, these subdued pressures in most segments highlight a continued source of downward pressure on inflation in Kuwait.

As consumer price data for 2012 comes to a close, we discern that lower than expected food price inflation and low pressures elsewhere have resulted in tamer inflation rates for the second half of the year, as we now expect inflation to average 2.9% for 2012. Some of the upside pressures (healthy consumer spending, higher international food and commodity prices, etc.) may still transpire later, but we generally expect inflation to remain modest through 2013, averaging 3.5%.