Yemen February inflation slips to lowest since December 2012

DUBAI Sun May 11, 2014 7:17am EDT

DUBAI May 11 (Reuters) - Yemen's annual inflation rate eased to 6.7 percent in February, its lowest level since December 2012, mainly due to reduced pressure from often volatile prices for food, tobacco and mild stimulant qat leaf, central bank data showed.

The impoverished Arab Peninsula country saw annual consumer price growth slowing gradually to 7.4 percent in January from a 16-month peak of 14.5 percent last June.

However, core inflation, which excludes prices of food, tobacco and qat leaf, remained elevated at 8.8 percent in February, slightly down from 8.9 percent in the previous month, which was the highest level since August 2012.

The core measure is partly held up by clothing and footwear prices, which soared 30.8 percent year-on-year for the third month in a row in February, the data showed.

Inflation dived at the end of 2012 as political unrest in Yemen subsided and economic activity showed signs of recovery from two years of turmoil.

That led the central bank to slash interest rates by 5 percentage points from October 2012 to February 2013, bringing them to a three-year low of 15 percent.

Headline inflation averaged 7.1 percent during this period and core inflation 7.3 percent.

The International Monetary Fund forecast in its regional outlook last week that Yemen's inflation would average 10.4 percent in 2014. Consumer prices grew 11.0 percent in 2013.

Food inflation decelerated to 4.4 percent year-on-year in February from 5.0 percent in January, the data showed.

Meanwhile, price growth for tobacco, cigarettes and qat leaf, which many of the country's 25 million people chew daily, slipped to single digits, growing 9.3 percent year-on-year after a 12.2 percent jump in the previous month.

On a monthly basis, living costs in Yemen, where a third of the population live on less than $2 a day, rose 0.4 percent in February, slightly faster than January's 0.1 percent increase. (Reporting by Martin Dokoupil; Editing by Sophie Hares)

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