The Inflation figures for October 2016, as released by the National Bureau of Statistics (NBS), has shown a 0.48% hike in Headline inflation to 18.3% (vs. 17.9% in September). The number came in at 0.1% higher than our forecast for the period.

 

A brief analysis of the report shows that the increase in inflation can be credited to increases across almost all divisions which contribute to the Headline index. The Communication, Restaurants and Hotels, sectors had the lowest month-on-month growth, having increased by 0.3% (5.7%) and 0.3% (9.4%) respectively. The core, food and imported food inflation indices advanced by 0.45% (18.1%), 0.47% (17.1%) and 0.44% (21.2%) respectively.

 

Core inflation rose by 18.1% (vs.17.7% in September). The rise is credited to increases in Housing, Water, Electricity, Gas and Other Fuels, Education, Clothing & Footwear, and Transport. Consequently, the Housing, Water, Electricity, Gas and Other fuels division recorded the highest increase of 26.9%, while Education, Transport and Clothing & Footwear divisions climbed by 20.3%, 18.2% and 17.8% accordingly.

 

Food inflation rose by 17.1% (vs.16.6% in September). In the month of October, all major food groups recorded price increases, with Fruits recording the least growth. However, the month-on-month rise of 0.85% can be specifically attributed to price increases in Meat, Bread & Cereals, and Fish. Imported food inflation also increased, though at a decreasing rate by 21.2% (20.8% in September). This may be attributed to the gradual shift in consumers demand for imported goods due to relatively higher price as a result of the FX conundrum.

 

Analysts see the sustained price increase in the Education division as likely to be linked to the spill-over of the “back to school” effect, which characterized the education division in September. Also, the increase witnessed in the Housing, Water, Electricity, Gas and Other fuel division may be as a result of the improvement in power generation witnessed during the period. They expect food prices to rise further in the remaining part of the year as we inch closer to the festivity season.

 

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