Amid a slowdown
or stabilization across all components except healthcare and local food, inflation
in the consumer price index (CPI) inched down from 3.4 percent year-on-year
(y/y) in April to 3.3 percent y/y in May. Although relatively low, local food
inflation climbed at a gradual pace for the third consecutive month. Local food
inflation is expected to remain soft in the second half of this year with the
International food prices declining as well. In order to limit any significant
inflationary gains, the stronger dinar is also projected. The average annual
inflation rate is forecast to close to 3.5 percent in 2015.
Core inflation
(CPI excluding food items) eased for the second consecutive month in May, from
3.7 percent y/y in April to 3.5 percent y/y. Core inflation is seeing some
reprieve because of subdued inflation across most components. Housing inflation
is also expected to ease modestly in the near-to-medium term which will help
keep core inflation in check. Inflation is off and now under 2 percent y/y
excluding housing (and food).
Global food
prices declined by 17.5 percent y/y and Inflation in the local food price index
edged up from 2.3 percent y/y in April to 2.6 percent y/y in May. The rise in
local food inflation may be due to the increased demand in the run-up to the
holy month of Ramadan in June.
Local Food
inflation will remain soft in the second half of 2015 because international
food prices are still declining. Inflation in housing services remained
unchanged from April at 6.3 percent y/y. This inflation component is updated
once every quarter with the next update due in the June report.
Due to healthy
demand levels, Housing inflation rose to an almost six-year high in March though
it is expected to subside later in 2015. Clothing and footwear inflation
declined by almost 1 percent and furnishing and household maintenance inflation
remained comfortable. Since most of the products in this segment are imported
and the dinar has remained strong the inflation is trending lower for a year.
The inflation of 'other goods and services' was down to 2.4 percent y/y in May
from 2.7 percent y/y in April.