May 2021 Inflation Expectation: Inflation in Advanced Climes Sees Uptrend

Proshare

Monday, June 07, 2021 / 02:32 PM / By Meristem Research / Header Image Credit: veedernet

 

As coronavirus vaccination and bolder steps at reopening economies gains momentum, concerns around the build-up of inflationary pressure (following the sharp decline witnessed at the wake of the pandemic) above acceptable thresholds have headlined monetary policy discuss.

 

However, top of mind for monetary authorities seem to be the need to keep monetary policy supportive of economic growth till pre-pandemic levels of output are achieved. In the United States, consumer prices were higher by 3.6%YoY in April (vs. 2.4%YoY in March and 1.6%YoY in February) mainly on account of a low base from last year and higher energy prices.

 

While the FOMC (Federal Open Market Committee) classes these factors as transitory, the Committee also recognized the speedy rate of economic growth (+6.4%YoY in Q1:2021), which it described as "rapid progress towards the Committee's goals". Like in the US, price levels in the Eurozone have also maintained an uptrend; climbing from 1.3%YoY in March to 1.6%YoY in April 2021. Eurostat estimates inflation would come in at 2.0%YoY in May 2021, driven mainly by much higher energy prices.

 

We note that in May, brent crude oil price averaged c. USD68pb (vs. USD65pb in April and March respectively). For oil prices, the elephant in the room is the ongoing negotiation between the US and Iran, and the likely return of Iran's supply to the oil market.

 

On another hand, global food prices have also continued to trend higher. Food inflation as shown by FAO (Food and Agriculture Organization of the United Nations) food price index was at 39.7%YoY in May 2021 - its highest since September 2011. The increase in May was due majorly to a sharp rise in the prices of oils, sugar, cereals, meat and dairy.

 

Nigeria: Base Effect to Relieve Headline Inflation

In April 2021, the first instance of disinflation in 20 months was recorded. Although our prognosis is that risk to consumer prices remain titled to the upside, on a year-on-year basis, we expect a moderation in headline inflation due to the relatively high CPI reading in May 2020.

 

Nonetheless, the persisting insecurity plaguing the Nation's food belt and the extant challenges associated with sourcing FX supports our notion of a month-on-month increase. Based on our perception of market prices, we expect food items like vegetables, fruits, yam, fish and beverages to remain the key drivers of food inflation.

 

Also, we fully expect festivity driven demand during the Ramadan celebrations to add another layer of pressure to prices. Overall, we expect headline inflation at 18.05%YoY in May 2021.

 

Proshare Nigeria Pvt. Ltd.


Kindly share and stay connected with us on our platforms via FacebookLinkedInInstagramTelegram

You can also subscribe to our NEWSLETTER here


Proshare Nigeria Pvt. Ltd.


Related News

  1. Nigeria Q1 2021: Out of Recession into Stagflation
  2. Inflationary Pressure Still Stretching Wallets
  3. Falling Inflation Allows MPC A Temporary Sigh of Relief
  4. Rising Inflation: FG Called to Block Leakages and Reduce the Cost of Governance
  5. Inflation Moderation Could Cool off Immediate Rate Hike Talks
  6. Unexpected Decline in April 2021 Headline Inflation
  7. The Naira Depreciated Against the US Dollar on IEFX Window as Nigeria's Oil Production Improved
  8. Headline Inflation Increases by 18.12% YoY In April 2021, 0.05% Lower Than March 2021 Rate - NBS
  9. April 2021 Headline Inflation to Reach 18.77%
  10. Inflation Rate: The 18.17% Rise of a Monster
  11. Economic Recovery is Gaining Momentum Globally - Comercio March 2021 Report
  12. Inflationary Pressures to Feed Expectations for Further Yield Increases
  13. Headline Inflation Crosses the 18% Threshold
  14. Headline Inflation Increases by 18.17% YoY In March 2021, 0.82% Higher Than February 2021 Rate - NBS
  15. Inflationary Pressure, Strained Pockets
  16. Headline Inflation to Surge Again Towards 17.8% in March 2021

 

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

READ MORE:
Related News
SCROLL TO TOP