Inflation outlook still negative, oil prices to drive rate higher – SIC Analysts predict

Outlook for the country’s headline inflation still remains negative according to economic analysts with State-owned insurance firm, SIC.

According to the analysts, Godwin Odoom and ObedSackey, inflation was expected to inch higher on the back of rising input costs and weaker exchange rates of the local currency (cedi).

In a report made available to norvanreports, the two analysts said spikes in oil prices as the Russia-Ukraine conflict continues, would drive overall inflation higher in the coming months.

This, they further noted, would be a drag on the country’s overall economic activity in the remaining months of the year.

Their assertion, however, goes contrary to that of the Governor of the Central Bank, Dr Ernest Addison, who noted in an interview with Bloomberg monitored by norvanreports that, inflation had reached its peak in May and that inflation was expected to reduce for the rest of the year.

But this, however, is not the case as inflation continued its upward trend reaching 29.8 per cent in the month of June, the highest recorded inflation rate in 19 years.

Inflation rate for June was mainly driven by transport costs which  saw a 41.6 per cent rise in inflation compared to 39.0 per cent in May  followed by Household Equipment and Maintenance (39.6 per cent), Housing, Water, Gas and Electricity (38.4 per cent) and Food and Non-Alcoholic Beverages (30.7 per cent).

The month-on month inflation between May 2022 and June 2022 stood at 3.0 per cent. The headline inflation rate is more than double the upper ceiling of the central bank’s inflation target band of  8+/-2 per cent.

Food inflation increased marginally to 30.7 per cent which is up from May’s food inflation of 30.1 per cent. Non-food inflation stood at 29.1per cent, compared to 25.7 per cent recorded in May. Overall month-on-month food inflation was 2.3 per cent.

Inflation for imported goods was 31.3 per cent while inflation for local goods was 29.2 per cent. For three months running, inflation for imported items exceeded domestic inflation.

Products such as education (4.4 per cent), Insurance and Financial Services (5.8 per cent) Health (12.8 per cent) Information and Communication (14.5 per cent), Restaurants, Accommodation and services (20.2 per cent) recorded inflation below the national average of 29.8 per cent.

He said on year-year basis, the difference between food inflation (30.7 per cent) and Non-food (29.1 per cent) was 1.6 percentage points, adding that on month-on-month basis, non-food inflation records a higher rate of 3.6 per cent relative to food (2.3 per cent), leading to 1.3 percentage point difference.

At the regional level, the Eastern Region recorded the highest inflation rate of 35.8 per cent while the Upper East Region recorded the lowest inflation rate of 21.0 per cent.

Government Statistician, Professor Samuel Kobina Annim, during the announcement asserted that a downward trend in inflation was dependent on the interventions that policymakers would put in place to check the rate of inflation.

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