Dear Subscriber,

The National Bureau of Statistics released its September inflation data yesterday (October 16). In line with expectations, headline inflation continued its upward trend, rising to 26.72% from 25.8% in August. A breakdown of the data showed that prices increased across all baskets, with food inflation spiking to a record high of 30.64%. Typically, food prices decline towards the end of Q3 as the harvest season kicks in. The aberrational movement specifically in 2023, is largely because of logistics constraints (bad road network, high distribution cost, etc) and the exchange rate pass-through effect on domestic prices. Year-to-date, the price of a 50kg bag of flour has increased by 16.18% despite the 24.18% decline in the global price of wheat. Also, core inflation (which excludes energy prices and seasonality) increased by 0.69% to 21.84%.

Is inflation about to start declining?

Inflation has increased consecutively in the last 9 months and analysts had expected the harvest to have a moderating effect on the food basket in September. Whilst inflation has defied expectations, it is noteworthy that the pace of increase in the general price level slowed. Also, the monthly inflation sub-index, which is a more current measure of price movement declined sharply by 1.08% to 2.1% (annualized at 28.34%). If this trend is sustained, our projection is that inflation will peak within the next three months and decline thereafter.

The big risk is that the proposed increase in wages and the effective date of the wage increase will be a potent factor in keeping inflation at elevated levels.

In the download and link, the FDC Think Tank analyzes the September inflation data and its impact on the economy and possible policy response.

Do enjoy your read…….