Qatar's consumer prices fell 0.9 percent on an annual basis in September, their mildest deflation so far this year, data showed on Wednesday, and analysts said the price decline seemed to be bottoming out.
Deflation in the world's top liquefied natural gas exporter has been easing gradually over the past months, reaching an annualised 2.1 percent in August, as its hydrocarbon based economy recovered from last year's sharp slowdown.
Living costs in the cash rich OPEC member remained flat from the previous month after August's 0.1 percent month-on-month rise, as a food price jump was offset by a drop in transport costs, data from Qatar Statistics Authority showed.
John Sfakianakis, chief economist at Banque Saudi Fransi said: "Deflation should now begin to bottom out, given that we are seeing two consecutive months of no deflationary trends."
He said: "In coming months we might see a small reversal of deflationary trends, but the overall average for the year will be deflationary, because of the strong deflationary trends for the first half of the year."
The International Monetary Fund said in February that the extent of Qatari deflation might be overestimated as measurement of rents is skewed towards new contracts, which had witnessed sharp falls in rents at the beginning of the year.
Qatar's central bank cited continued deflation as one of the reasons behind a 50 basis point cut in its deposit rate in August. Housing costs, which have the largest 32 percent weight in the overall basket, were stable month-on-month in September after a 0.4 percent dip in the previous month.
Transport and communication prices fell 0.8 percent after a 0.3 percent rise in August, while food costs soared 1.5 percent in September after staying flat in the previous month.
Food prices usually rise during the holy month of Ramadan, which ended in mid September, as families enjoy larger and more elaborate evening meals after daylight fasting.
Farah Ahmed Hersi, senior economist at Masraf Al Rayan in Doha said: "It's clearly out of the question that we will always be in a deflationary position. The economy is now growing at a double-digit rate, and that generates a certain amount of inflation."
Qatar's economy is seen largely outperforming fellow Gulf energy producers with expected growth of 15.5 percent this year, up from 8.7 percent in 2009, mainly due to expansion of its gas output and government infrastructure spending.
Analysts polled by Reuters expected average deflation of 1.7 percent in 2010, after consumer prices fell by 4.9 percent last year, the first full year of deflation since 1993.
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