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Some Prices Are Increasing When Headline Inflation is Declining

Proshare

Tuesday, May 30, 2017 / 6:14 PM /FDC

Headline inflation dipped 0.02% to 17.24%, however, consumers say they do not feel any relief yet. Some are even asking for a 311% increase in the minimum wage to N56,000. All of this is because retail prices have been sticky downwards.

The attached bulletin is a summary of commodity price movements this week, explaining why some prices are actually increasing when headline inflation is declining.


Burning Economic Issues
  

·        Crude continues to retreat despite OPEC extension announcement

·        Currently trading at $52.10pb

·        Production is challenged as Forcados repairs take longer than expected

·        Currency reserves slide to N382

·        Oil marketers grumble renewed build up in arrears

·        Diesel price reverses trend, trading lower at N175

·        External reserves also trending lower at $30.49bn

·        Impact on commodity prices not yet apparent   

Economic News  

The Good  

·        Potential for a more balanced oil market

·        Feeding into high forex and fiscal earnings

·        Power at the grid continues to recover, currently at 3769MW/hr  

The Bad 

·        Political priorities might come at an opportunity cost to economic recovery

Power Generation analysis & Impact  

May 28th: Average power output was 4,005MWh/hour (up 237MWh/h)

·        1,830MW for gas, 147.5MW line, 160MW high frequency and 90MW water constraints

·        Estimated loss: N1.07bn (annualised at N390.55bn /$1bn)

·        Shiroro is restored to functionality

·        Gbarain NIPP is still down due to tripping of Alaoji/Owerri 132kV line

  


Domestic Commodity Prices Movement   


 
  

 Stock Market 

·        NSE ASI 2.10% to 29,064.52pts

·        Positive market sentiment continues to drive stock market rally  

Oil prices 

·        Brent crude 0.10% to $52.10pb

·        Crude prices retreating despite cut extension announcement

·        Investors dissatisfied that production cut has extended but not deepened

·        Market also awaits US production data before making major decisions

·        US data released extended by one day due to memorial day festivities
 

Oil markets today

 



Outlook – Oil Prices    
 

·        US output data to put cap on major trading activity this week

·        As investors await production and inventory data

·        Therefore prices to trade relatively bearish

·        Analysts believe that impact of cut extension should hit the market Q3’17

·        However, extent of rally is limited


Outlook – Agric Prices 


Grains   

·        Strong demand from Asia to offset increased grain exports  

Soft 

Sugar

·        Expectations of a bearish sugar market to persist this week

Cocoa 

·        Bearish price trend to persist well into 2019 following oversupply  


Related News

1.  Domestic Commodity Prices Remain Sticky Downwards as Crop Diseases Keep Prices Elevated

2.      Price of a Bag of Rice Declined by 14%

3.      Commodity Prices Maintained Upward Trajectory

4.      Recent Spike in Commodity Prices Confounded Analysts

5.      Retail Prices Remained Stubbornly Static as Naira Strengthened at the New Forex Window  

6.      Commodity Retailers Leave Retail Prices Unchanged

7.      Oil Prices Took a Hit as Naira Converged Below N400 to a Dollar

8.     Retail Commodity Prices Remained Relatively Unchanged as Manufacturers Capitalize on Margins

9.      The Impact of CBN's Intervention on Commodity Prices Not Yet Seen

10.  The Impact of Global and Domestic Developments on the Commodity Markets

11.   Naira Recovers by 5 percent in 2 days to N495 to 1$; Oil Trades at $57pb

12.  Are The Economic Realities of 2016 to Persist in 2017?

13.  Increasing Consumer Resistance and Declining Income Is Taking Its Toll on Retail Prices

14.  Consumer Effective Demand Negatively Affected By Festive Spending

15.   Domestic Commodity Prices Have Reached Their Peak

16.  Prices of Christmas Sensitive Staple Foods Remain Sticky Downwards

17.   Domestic Commodity Prices Oblivious to a Falling Naira

18.  Domestic Food Prices May Have Reached a Plateau as Consumer Resistance Bites Harder

19.  Retailers Brace up for a Bleak Christmas

20. The China Futures Association Signs MoU with Intnl’ Commodities & Derivatives Assn

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