Tuesday, July 19, 2016 9:30AM /FBNQuest Research
The latest inflation report from the NBS shows the fifth successive acceleration in the headline rate to 16.5% y/y in June from 15.6% the previous month. Our own contribution to wire service polls of analysts was a rate of 16.2% y/y. There was a steep increase in the core measure to 16.2% y/y from 15.1%.
The NBS commentary identifies energy products and import items as the principal drivers. Food price inflation in June was 15.3% y/y, compared with 14.9%. Seasonal, post-harvest effects may prove positive in the months ahead.
Energy cost increases were again heavy. The category for housing, water, electricity, gas and other fuels rose by 24.2% y/y in June (22.0% in May).
The fx impact is discernible in the fact that the y/y rise in the urban index in June was running three percentage points ahead of its rural equivalent.
The CBN has started to adopt a less interventionist stance in the reformed foreign exchange market, which will be rewarded over time, we suspect, by autonomous inflows from the portfolio community and other players. Once the rate has overshot and then corrected itself, we see a mild easing of inflationary pressures. For July we see a headline rate of 17.4% y/y.
Our more eagle-eyed readers will have noticed that the headline rate y/y in June was higher than that of its constituent parts (non-food and food). We must therefore spell out the NBS health warning that processed food stuffs are elements of both parts. Imported food inflation surged to 20.1% y/y in June from 18.6% the previous month.
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