Decline in Market Supply Pushed Headline Index Higher

• Headline CPI ticked up by 15bps to 12.56% YoY, highest since April 2018
• Core inflation grew by 1bps to 10.13% YoY, highest since August 2018
• Food price index jumped 13bps to 15.18% YoY

The decline in market supplies occasioned by the restriction of interstate movement resulted in a spike in prices of staple foods and farm produce in the month of June. Accordingly, food inflation expanded month-on-month by 1.46% – the highest MoM increase in about 24 months. Largely, most of the increase in the food index emanated from higher prices of farm produce. For context, while the headline index expanded 5bps to 1.21% MoM in June, the headline index excluding farm produce contracted 2bps to 0.86% MoM and when further adjusted for energy related cost, the headline index fell 4bps in June. Surprisingly, while imported food increased by 2bps to 1.29% MoM, processed food prices contracted during the month. The decline in the core index by 2bps to 0.86% MoM is however surprising given modest increases in most constituents – HWEGF (+2bps to 0.74% MoM), clothing and footwear (+3bps to 0.90% MoM) and furnishings (+3bps to 0.84% MoM) – expanding during the month.