Kuwait had seen inflation easing from May’s peak of 5.4 percent in 2011 but consumer price growth picked up speed again in January, partly due the food item.

Prices in Kuwait’s $171 billion economy grew 0.8 percent month-on-month in March, a six-month high, up from a 0.2 percent rise in February, data from the Central Statistics Office showed.

“We had expected to see a rise in prices, partly related to global food price increases, but mostly as a result of domestic strikes including of customs workers,” said Monica Malik, chief economist at EFG-Hermes in Dubai. “These strikes pushed up prices of imported goods, including food.”

Around 3,000 Kuwaiti customs workers went on a week-long strike in March, which disrupted traffic at ports, demanding higher salary increases despite the government plan for a 25 percent rise in public wages. Employees at Kuwait Airways grounded planes for three days during a walkout.

Food costs, which account for almost one fifth of Kuwait consumer expenses, soared by 2.6 percent month-on-month in March, their quickest advance in 15 months, up from a mere 0.1 percent increase in February.

Housing and transport prices, which together make up 43 percent of the basket, remained flat, the data also showed.

“At the moment, the rise is clearly being driven by higher global food prices, which have really started to recover after coming down over 2011,” said Liz Martins, senior MENA economist at HSBC in Dubai.

“Domestic inflation drivers are not yet in evidence, but the recent wage rises and expansionary government spending could start to feed through to stronger demand side price pressures later in the year,” she said.

EFG’s Malik expected inflation to fall in the following months as government wage increases helped to end the strikes. Giyas Gokkent, chief economist at National Bank of Abu Dhabi sees inflation hovering around 4 percent in the near term.

Analysts polled in March expected average inflation in Kuwait to slow to 4.5 percent in 2012 from a three-year high of 4.8 percent last year given a weaker global economic environment.

Kuwait abandoned its direct peg to the US dollar in 2007 to rein in runaway inflation. It links its dinar to an undisclosed basket of currencies, which is believed to be heavily dollar dominated.

In a separate release, annual inflation in the nearby United Arab Emirates remained at 0.6 percent for the second month in a row in March, while living costs fell 0.2 percent from the previous month, data from the National Bureau of Statistics showed.

“The decline in rents is expected to continue to weigh down on the overall consumer price index in 2012,” NBAD’s Gokkent said in a note. “Base effects are expected to cause a rise in annual inflation modestly after the first quarter of 2013.”

Housing costs remained depressed in March, falling by 0.7 percent month-on-month for the second consecutive month. That reflects ongoing oversupply in the market, which has yet to recover from impacts of Dubai’s debt crisis in 2009-2010.

Inflation in the second largest Arab economy is forecast to climb to 2.0 percent on average this year from 0.9 percent in 2011, the poll showed.

FROM: REUTERS