Inflation forecast: Headline index seen in marginal decline

By Adaeze Okechukwu
IN spite of the persistent pressure on the food inflation, the headline inflation rate has been forecast to drop by about five points to 15.96 percent for the month of July 2017 from 16.10 per cent recorded in the preceding month.

This was the projection of research analysts at FSDH Merchant Bank Limited in a recently released report which, however, ascribed the five-month consecutive decline in the inflation rate year-on-year (YoY) from January to June 2017 to the impact of the base effect in the previous year.

According to the report, the expected further decline in the headline rate for July can been largely attributed to the downward movement in some categories of non-food items in the Consumer Price Index (CPI) basket, as well as decreases in some major food prices. While the five-consecutive month decline in headline rate persisted, the food index had remained on the increase.

Meanwhile at the backdrop of this domestic price index, the monthly Food Price Index (FPI) released by Food and Agriculture Organization (FAO) of the United Nations, indicated a July 2017 index averaged 179 points, which was 2.24 per cent higher than the preceding month. The figure represented the third consecutive month of increase.

Accordingly, FAO ascribed the increase in the value of the Index in the month of July mainly to the supply constraints and currency movements in the prices of items such as cereals, sugar and dairy. Meantime, the prices of most food items FSDH analysts monitored in the month of July 2017 moderated, while a few of them appreciated. “The movement in the prices of food items during the month resulted in 1.25 per cent increase in our Food and Non-Alcoholic Index to 248.20 points. We noticed increase in the prices of Housing, Water, Electricity, Gas and Other Fuels divisions between June 2017 and July 2017,” the analysts explained. As a result, FSDH maintained that the general price movements in the consumer goods and services in July 2017 would increase the Composite Consumer Price Index (CCPI) to 236.83 points, representing a month-on-month increase of 1.13 per cwent. “We estimate that the increase in the CCPI in July 2017 would produce an inflation rate of 15.96 per cent lower than the 16.10 per cent recorded in June 2017,” they stated.

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