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MENAFN - Kuwait News Agency (KUNA) - 08/09/2012

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(MENAFN - Kuwait News Agency (KUNA)) The soaring global food prices have driven Kuwait's inflation rates up to 3.1 percent in July 2012, a specialized report by Kuwait Finance House Research Ltd. revealed Friday.

"Kuwait's consumer price index (CPI) based inflation inched up to 3.1 percent y-o-y in July 2012 from 2.8 percent y-o-y in June 2012 as food prices (the second largest contributor of Kuwait's CPI basket at 18.3 percent) rose to 6.6 percent y-o-y in July 2012 from 4.9 percent y-o-y in June 2012," reads the report.

The KFH added that the overall inflation rose to 0.5 percent in July 2012 from 0.2 percent in June 2012.

It underscored that the rise in Kuwait's overall inflation is mainly driven by higher food prices.

"The rise in Kuwait's food prices is in line with the soaring global food prices. Kuwait imports most of its food items (approximately 90 percent) for domestic consumption which leads to imported food price pressure," it noted.

"The rising global food prices pass through local value chains in Kuwait and this leads to high inflation. Food and beverage producers are now looking to push higher commodity prices up the value chain where ultimately the cost will be borne by the consumer." The FAO Food Price Index rose to 213.2 points in July 2012, as much as 13 points (6.0 percent m-o-m) up from 200.8 points in June 2012.

The July 2012 surge of the Index followed three months of decline. The sharp rebound was mostly driven by a jump in grain and sugar prices.

On the other hand, the KFH report noted that the housing segment prices (the largest component of Kuwait's CPI basket) remained unchanged at 1.6 percent y-o-y in July 2012 (June 2012: 1.6 percent y-o-y).

"Nonetheless, a strong recovery of the real estate sector in Kuwait is anticipated to continue given the latest transaction volumes," it said.

"In general, real estate transactions continue to be supported by strong demands for residential and investment properties, but are somewhat being affected by a sluggish commercial real estate sector.

" The report concluded that Kuwait's inflation rate is expected to remain low in a range of 3-4 percent y-o-y in 2H 2012 (YTD: 3.3 percent y-o-y) and 4.0 percent y-o-y on average in 2012 (2011: 4.7 percent y-o-y) as the government's price control measures on fuel and food items through extensive subsidy system will prevent higher inflation in the future.

Meanwhile, the report unveiled that the inflation across the Gulf Cooperation Council (GCC) member states remains controlled.
"Prices remain stabilized, helped by a tightening of subsidies by most economies and a stronger USD, to which all GCC countries (except Kuwait) peg their currencies.

Higher food prices pushed up inflation in Kuwait and Saudi. However, falling rents curb inflation in Qatar, UAE (particularly Dubai) and Oman from rising above uncomfortable level," the report pointed out.


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