Inflation pulls surprise with biggest jump since Jan 2003

Economic growth slowed
  • Hits 50.3%

 Consumer inflation has seen its biggest leap in nearly two decades, as data from the Ghana Statistical Service show it has increased by 9.9 percentage points over what was recorded in October.

As opposed to market forecasts of approximately 44.8 percent levels of ±0.5 percent, consumer inflation managed to pull off a remarkable feat, breaching the 50 percent threshold for an accelerated 18th consecutive month.

Headline inflation surged to 50.3 percent year on year (y/y) in November 2022 on the pass-through effects of the weaker cedi and rising petroleum prices, jumping from 40.4 percent y/y in October 2022 and currently sitting approximately 5x over the Bank of Ghana’s upper policy target of 10 percent.

This makes it the highest increase in rate for a single month since January 2003 – when the rate shot up by 12 percentage points from the 13.5 percent recorded the previous month.

Ghana Statistical Services (GSS) observed a wide disparity across the 13 divisions – with housing, water, electricity, gas and other fuels leading with 79.1 percent; followed by furnishings, household equipment and routine household maintenance with 65.7 percent; transport logged 63.1 percent while personal care, social protection and miscellaneous goods and services logged 56.3 percent; and food and non-alcoholic beverages were at 55.3 percent.

The transport sub-group drove the monthly inflation growth at 12.8 percent followed by food and non-alcoholic beverages at 10.4 percent; meanwhile, the personal care, social protection and miscellaneous goods and services; furnishings, household equipment and routine household maintenance and housing, water electricity, gas and other fuels logged 8.3 percent, 7.7 percent and 6.4 percent respectively.

Food inflation recorded 55.3 percent in November 2022 from 43.7 percent in the previous month, while it grew by 10.4 percent on a monthly basis.

Market watcher Constant Capital observed that the ongoing harvest season is failing to ease pressures on food prices, with significant post-harvest losses contributing to the rising food inflation.

Non-food inflation recorded 46.5 percent during the period from 37.8 percent in October 2022, while increasing 7.2 percent on monthly basis. This has been attributed to hikes in utility tariffs, petroleum and transport costs, as well as further depreciation of the cedi.

“We expect inflation to maintain its upward trajectory for the rest of the year, on the back of rising domestic petroleum prices, the upward adjustment in commercial transport fares and cedi-depreciation over the year. We think the November 2022 headline inflation could be reported at around the 44.8 levels (±0.5%),” it stated in its forecast.

BoG’s efforts

The Bank of Ghana’s Monetary Policy Committee (MPC) decided to increase the benchmark policy rate by 250bps to 27 percent at its November 2022 meeting, maintaining its monetary policy tightening posture after assessing the most recent macroeconomic developments.

The Monetary Policy Rate (MPR) was raised by 250 bps to 27 percent, the highest level in nearly two decades. The MPC hinted that additional monetary tightening could be conducted along with the use of other available measures to stabilise money supply and contain inflation.

Inflation expectations

Inflation is forecasted to reach its peak in Q1-2023 and then drop to about 25 percent by the end of 2023.

“We think the most recent policy decisions haven’t done much to reduce volatility in exchange rates and inflation expectations,” Constant Capital said.

Economic activity slowed in September 2022 – captured in a 1.2 percent contraction in BoG’s Composite Index of Economic Activity (CIEA) due to lower domestic VAT collections, port activity and cement sales.

According to the October 2022 survey, Business and Consumer sentiments have also continued to drop on account of rising inflation, cedi-depreciation and uncertainty about future economic conditions.

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