The newly released August inflation report showed that headline inflation rate moderated further to 11.02% year-on-year (from 11.22% in July 2019), printing the third consecutive month of decline.
The continuous downward movement in the annual inflation was driven by the recent decrease in the annual food inflation rate, in addition to the declining single-digit core inflation rate. Particularly, the annual food inflation rate slowed to 13.17% in August 2019 from 13.39% in July 2019. Also, monthly food inflation slowed m-o-m to 1.22% in the month of August from 1.26% in the month of July as the planting season began to wind down.
August food inflation rate dropped to single-digit in Kogi state 8.97% (from 10.36%) and Katsina State 9.64% (from 11.86%). Similarly, the food inflation rate reduced to 10.32% (from 10.43%) and 10.34% (from 10.60%) in Bayelsa and Delta State respectively.
Annual core inflation eased further into single-digit to 8.68% y-o-y in August 2019 from 8.80% in July 2019 on the back of the decline in clothing and footwear (-0.06%). Also, we saw the core inflation rate slow on a monthly basis to 0.67% (from 0.77% in July).
In the same vein, y-o-y change in price level for imported food decreased by 0.57% despite the depreciation of the Naira against the USD at the interbank window where two months moving average foreign exchange rate rose (i.e Naira depreciated) m-o-m by 0.11% to N357.74/USD in August 2019.
“We expect the annual inflation rate to moderate in the coming months as harvest season beckons. We feel the expected moderation in food inflation could have a larger impact on the general price level than the rising trend in transport and energy costs”.
Cowry Asset Nigeria