The Consumer Price Index (CPI) report released by the National Bureau of Statistics (NBS) showed that annual inflation rate maintained its upward trend as it rose further to 12.82% in the month of July (higher than 12.56% in June) in line with our expectations.
The higher inflation rate was chiefly due to a spike in the food prices given the ongoing planting season and insecurity challenges in some part of the country. Specifically, annual food inflation rose to 15.48% in July from 15.18% printed in June.
Also, monthly food inflation jumped to 1.52% in July (from 1.48% in June) as prices of bread, cereals, potatoes, yam and meats, amongst others, increased. Similarly, we saw the imported food index expand to 16.35% (higher than 16.31% in June) – as Naira further depreciated against the USD at the Interbank, Bureau de Change and the parallel markets.
Specifically, two months moving average foreign exchange rates rose y-o-y by 3.47%, 15.74% and 28.40% to N381/USD, N414.81/USD and N463.50/USD at the respective market segments in July 2020.
However, Core inflation rate moderated to 10.10% (from 10.13% in June) despite the increases recorded in clothing and footwear (+0.90%), transportation costs (+0.37%) and housing and energy (+0.11%). Also, on a monthly basis, core inflation slowed to 0.75% (from 0.86% in June). Meanwhile, urban and rural inflation rates rose to 13.40% and 12.28% (higher than 13.18% and 11.99%) respectively.
“We expect sustained upward pressure on the inflation rate in August as the ongoing planting season would have a northward effect on food prices going forward.