Inflation: Mixed outlook as food prices remain high

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Against the backdrop of deceleration of inflationary pressures announced by the National Bureau of Statistics, NBS, last week, further insight into price movements in the first quarter of the year has indicated a mixed result.

Financial Vanguard and other analysts’ reports indicate that the deceleration was principally a year-on-year, YoY, base effect rather than a decline in prices, especially in food and related items in the market.

The NBS report for March 2017 had indicated that inflation rate slowed further to 17.26 per cent YoY in March from 17.87 per cent YoY in February. Giving a Month-on-Month, MoM, analysis of the parameters, economists at Cardinal Stone Partners Limited, a Lagos based investment house, stated: ‘‘The relatively slower pace of increase in YoY headline CPI (Consumer Price Index) primarily reflects the impact of base effects given the significant jump in the index in the corresponding period of 2016.

‘‘On a month-on-month basis however, headline inflation accelerated to 1.72 per cent MoM against February level of 1.49 per cent MoM, as both the food and core sub-indices increased in March.

‘‘We believe the drag from higher staple food prices is the direct result of higher export demand (given the significant depreciation in the Naira) as well as higher transport costs ( a major component of the core index).’’

Contrary to inflation reports showing declines for two consecutive months this year (February and March) the petroleum products price watch released by NBS last weekend shows that huge gap still exists between average price of the products in the first quarter 2017 (Q1’17) and preceding quarter, Q4’16.

In the report average price of Kerosene in Q1’17 was N365.94 per litre, about 35 per cent higher than N269.15 recorded in the preceding quarter.

Also average price of 5kg cooking gas at N2,589.84 was about 28.8 per cent higher than N2,010.6 recorded in the preceding quarter.

Vanguard

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