Inflation slides back to single digit…drops to 9.6% in July

Inflation July 2018

The year-on-year rate at which the general price level of goods and services increases has dropped from 10 percent in June to 9.6 percent in July, data released by the Ghana Statistical Service (GSS) have revealed.

According to the GSS, the 0.4 percentage point reduction can be attributed to a decline in the general price of items in the non-food component of the inflation basket.

“The reduction is due to the fact non-food group inflation fell by about 0.5 percentage points from 11.2 to 10.7 percent, and this is responsible for the fall in inflation that we are observing. For most of the non-food subgroups, inflation rate declined; and the main cause is the base rate effect.

“Food went up marginally – that is, from 7.3 to 7.4 percent – and that didn’t have much effect on the trend we are observing. This is because the food basket’s weight is lighter than that of the non-food, and so changes in the non-food will have a bigger effect on inflation rate than the changes in food,” acting Government Statistician Baah Wadieh said.

Drivers of the non-food group include clothing and footwear, which recorded inflation rate of 15.4 percent; transport 15 percent, recreation and culture 13.4 percent, furnishing and household equipment 12.5 percent, and miscellaneous 12 percent.

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The food and non-alcoholic beverage group recorded a year-on-year inflation rate of 7.4 percent, a 0.1 percentage point increase over the rate recorded in June 2018.

Drivers of this group are coffee, tea and cocoa, which recorded 11.3 percent; fruits 9.7 percent, meat and meat products 8.6 percent; mineral water, soft drinks 8.4 percent; vegetables 8.4 percent, and food products 7.7 percent. This means that six subgroups recorded rates higher than the basket’s average of 7.4 percent.

Inflation for imported items recorded 11.5 percent, the same as that recorded last month. This was 2.7 percentage points higher than that of locally-produced items, which recorded 8.8 percent.

At the regional level, five regions – Upper West, Brong-Ahafo, Western, Ashanti and Northern – all recorded rates higher than the national average.

Upper West recorded the highest at 11.5 percent, followed by Brong-Ahafo with 10.5; whereas the Upper East Region recorded the lowest rate of 7.8 percent.

The July rate is 0.7 percent shy of government’s overall end of year target of 8.9 percent.

Last month, the central bank stayed the policy rate at 17 percent in July – allowing upward movement of the inflation rate from May (9.8 percent) to 10 percent in June.

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The bank stated it wants to remain cautious while monitoring the progress of inflation in the months ahead before any further reduction in the policy rate can be possible.

“Headline and core inflation have trended up in recent months, although inflation expectations remain broadly well-anchored. The medium-term forecast has remained broadly unchanged and suggests a gradual return to the central path over the horizon.

“Given the circumstances, especially with regard to the global outlook, the Committee decided to maintain the Monetary Policy Rate at 17.0 percent while closely monitoring developments in the near-term. The Committee stands ready to take the appropriate policy measures to promptly address any potential threats to the disinflation path,” said the Bank of Ghana Governor, Dr. Ernest Addison.

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