The Consumer Price Index report published Wednesday showed that headline inflation rose to a 25-month high to 12.4 per cent year-on-year in May 2020, from 12.3 per cent in the previous month.
This was despite the sustained upward pressure on consumer prices as headline inflation rose 1.2 per cent mont-on-month from one per cent, the highest since June 2018.
Notably, core inflation rose faster by 14bps to 10.1 per cent year-on-year from 10 per cent in April 2020, the highest since July 2018.
However, core inflation increased 5bps slower at 0.9 per cent on a month-on-month basis, the first moderation since February 2020. Meanwhile, food inflation was little changed at 15.04 per cent year-on-year from 15.03 per cent in the previous month.
Analysts at Afrinvest said they suspected that this is due to a high base as there was a sustained surge in m/m inflation to 1.4 per cent from 1.2 per cent in April 2020. This is the highest month-on-month rise since August 2018 and it suggests that underlying consumer price pressure remains strong. Accordingly, it is clear that headline inflation continues to be driven by changes in food prices.
Looking forward, we expect an uptrend in inflation as consumer prices more fully reflect the lean agriculture season, the recent VAT adjustment, exchange rate devaluation, the resumption of more economic activities and energy (fuel & electricity) price adjustments.
