But analysts appear surprised that the increase was moderate,
beating their projections at the backdrop of the reforms in the petroleum and
foreign exchange sectors which pushed up prices in June.
However, the National Bureau of Statistics, NBS, said the food inflation rate quickened YoY
to 25.25 per cent in June from 24.82 per cent in May.
The Bureau stated: “On a YoY basis, the Headline inflation
rate was 4.19 percent points higher compared to the rate recorded in June 2022,
which was 18.6 percent.
This shows that the headline inflation rate (YoY basis)
increased in June 2023 when compared to the same month in the preceding year
(i.e., June 2022).
“On a year-on-year basis, the Urban inflation rate in June
2023 was 24.33 percent, this was 5.23 percent points higher compared to the
19.09 percent recorded in June 2022.
“The Rural inflation rate in June 2023 was 21.37 percent on
a YoY basis; this was 3.25 percentage points higher compared to the 18.13
percent recorded in June 2022.”
On food inflation, it said: “The food inflation rate in June
2023 was 25.25 percent on a YoY basis; this was 4.65 percentage points higher
relative to the rate recorded in June 2022 (20.6 percent).
“The rise in Food inflation on a YoY basis was caused by
increases in prices of oil and fat, bread and cereals, fish, potatoes, yam and
other tubers, fruits, meat, vegetable, milk, cheese, and eggs.”
Commenting on the development, analysts at CardinalStone
Research said: “The outturn defied
expectations and printed materially lower than our projection of 25.0%, with
deviations stemming from a positive surprise in the core inflation basket.
“We had anticipated that the 175.2% jump in average PMS
prices (following subsidy removal) would have resulted in a 300-400bases points
(bps) surge in Month-on-Month (MoM) headline inflation.
“However, the latest report revealed that while all its
subcomponents increased by an average of 13bps MoM, core inflation surprisingly
moderated by 7bps.
However, the analysts added, “Despite the shock numbers, we
see latitude for more inflationary pressures in the coming months partly due to
the lagged impact of subsidy removal and its pass-through to broader prices. In
addition, the recent uptick in parallel market rates (possibly stoked by
seasonal demand) will likely add another layer of pressure on prices.”
Commenting as well, analysts at Cordros Research said: “We
expect pressures on food inflation to remain intact in July, as higher
transport costs will likely continue to filter into food prices. In addition,
we understand that Russia is considering terminating the Black Sea grain deal
(which expires on 17 July) as part of the agreement concerning the country is
yet to be fulfilled. Accordingly, we expect the preceding to pose further risk
to imported food prices in the near term”.
“Finally, July marks the beginning of the lean season in the
north amid high flooding in the southern region. Thus, the food demand-supply
gap is likely to remain wide. Therefore, we expect food prices to rise by 2.10%
in July.”