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May inflation to slow for sixteenth successive months to 11.5% – FSDH

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FSDH Merchant Bank Limited, has predicted a drop in the rate of inflation (year-on-year) from 12.48 per cent recorded in April to 11.5 per cent in May 2018, according to a recent report released by its research team.  If this falls through, would mark the sixteenth month that prices have cooled.

The expected drop in inflation rate is premised on the base effect of higher prices in the Composite Consumer Price Index (CCPI) in May 2017 than the current month.

The Monetary Policy committee (MPC), on its 216th meeting and the second for the year voted to retain its repo rate at a record high of 14 per cent for the 10th time since July 2016.

The committee held its gun, in a bid to cushion the effect of election spending, delay in budget implementation, and spiralling inflation which soared to an 11-year high in April 2016, following a big naira devaluation and an upward review in the retail price of petrol.

“We expect the rate of inflation to cool 0.98 bps to 11.5 percent in May 2018,” FSDH said, ahead of an official release by the National Bureau of Statistics (NBS) on Wednesday June 13.

The Food Price Index (FPI) from the Food and Agriculture Organization (FAO) for the month of May 2018 shows that the Index averaged 176.2 points, 1.24 percent higher than the revised value for April 2018, and 1.90 percent higher than the May 2017 figure.

The increase recorded in the FPI was because of a strong recovery in dairy and cereal prices, while vegetable oils and sugar prices remained under downward pressure.

The FAO Dairy Price Index was up for the fourth consecutive month, recording an increase of 5.45 percent between April and May. The FAO Cereal Price Index was up by 2.44 percent, largely due to the increase in the prices of wheat, coarse grains and rice.

However, the FAO Vegetable Oil Price Index was down by 2.58 percent, primarily driven by a decline in the prices of palm, soy and sunflower oils occasioned by slow global imports demand and large inventories.

The FAO Sugar Index fell for the sixth consecutive month as a result of increased supply conditions in the main sugar producing region of Brazil. The FAO Meat Index was marginally down by 0.48 percent driven by the decrease in the prices for ovine and pig meat.

The value of the Naira depreciated at both the Nigerian Autonomous Foreign Exchange (NAFEX) and parallel markets in May 2018. The value lost 0.40 percent and 0.14 percent to close at US$/N361.62 and US$/N363.50 respectively at the NAFEX and parallel markets at the end of May

FSDH said that “the rise in the international prices of food coupled with the depreciation in the value of the Naira led to an increase in the prices of imported consumer goods in Nigeria between the two months under review,”

FSDH also noted that there is a potential increase in the local prices of imported food items because of the faster than expected increase in the international food prices.

The prices of most of the food items in May 2018 increased substantially, leading to a 1.20 percent increase in our Food and Non-Alcoholic Index.

This Index increased year-on-year by 13.29 percent, up from 240.30 points recorded in May 2017.

There was also an increase in the prices of Transport and Housing, Water, Electricity, Gas & Other Fuels divisions between April and May 2018.

We estimate that the increase in the CCPI in May would produce an inflation rate of 11.50 percent, lower than the 12.48 percent that was recorded in April.

“We estimate that the increase in the CCPI in May would produce an inflation rate of 11.50 percent, lower than the 12.48 percent recorded in April,” FSDH said.

 

The post May inflation to slow for sixteenth successive months to 11.5% – FSDH appeared first on BusinessDay : News you can trust.

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