Inflation jump not threat to govt target
The slight upsurge in inflation from 12.8 per cent in April to 13 per cent in May, occasioned by the increase in transport fares, will not pose an immediate threat to the government’s end-year target of 11.2 per cent, according to Databank analysts.
Advertisement
The increase, however, is expected to consolidate the disinflation process on the back of cautious monetary easing process by the Bank of Ghana (BoG).
Senior Economist at Databank, Mr Kingsley Courage Martey, said an in an interview that the broad inflation outlook remained tilted to the downside, renewed upside risks from non-food inflation could delay the inflation decline to the BoG’s target band of six to 10 per cent.
“In view of this, we maintain our stance in favour of a cautious approach to monetary easing, especially in first half of 2017,” he said.
Headline Consumer Price Index inflation rate quickened by 20 basis points to13.0 per cent in April 2017, the first increase in seven months despite a 60bps slowdown in the food inflation group to 6.7 per cent.
Shock to expectations
“We believe the increase in headline inflation is a shock to the broad expectations of the market, especially as the higher transport fares which pushed up the headline inflation coincided with a significant recovery in the Ghana Cedi,” he said.
The uptick in headline inflation reflects greater upside pressures from the 15 per cent hike in transport fares announced by the private road transport operators in early April this year.
Although the cedi’s stability and lower ex-pump prices pose downside risks to inflation, it is expected that a 10bps climb in May-2017 inflation rate to 13.1 per cent Year-On-Year due to a potential lag effect of higher transport fares.
Analysis of the figures shows that the non-food group recorded a year-on-year inflation rate of 16.3 per cent in April compared to 15.6 per cent in March. Five subgroups recorded year-on-year rates higher than the group’s average.
Transport topped with a rate of 24.9 per cent, followed by recreation and culture with 22.3 per cent, while furnishing, household equipment and routine maintenance also recorded 21.9 per cent.
Food inflation
The food and non-alcoholic beverage group also recorded a year-on-year inflation rate of 6.7 per cent, a 0.6 percentage point higher than the March rate.
Non-food inflation climbed by 70bps to 16.3 per cent Year-On-Year, reflecting the upside pressure from the 15 per cent hike in transport fares.
Inflation for the transport sector surged by 960bps to 24.9 per cent to outweigh the broad decline in other components of the non-food group.
The main price drivers for the food group were fish and seafood, which recorded 13.6 per cent; meat and meat products also recorded 10.9 per cent, and coffee, tea and cocoa recorded 7.2 percent.
The year-on-year inflation rate for imported items also hit 15 per cent, 2.8 percentage points higher than that of locally produced items of 12.2 per cent.
The Government Statistician, Mr Baah Wadieh, said at a news conference in Accra that the jump in inflation for May was due to the increase in transport fares.
“It went up by 9.6 percentage points. We have communications also inching up slightly by 0.1 percentage point and miscellaneous goods went up by 0.1 percentage point. So, these are what accounted for the rise in the inflation rate,” he said.
The monthly change rate for April 2017 was 1.6 per cent compared to the 1.3per cent recorded for March 2017.