Weekly Economic And Financial Commentary – July 20, 2020

Data released last week by the National Bureau of Statistics showed headline inflation expanded by 12.56% YoY, coming ahead of May level of 12.40% YoY. The expansion emanated from a much faster increase in the food index, which outweighed largely flat increase in the core index. The food index surged 13bps to 15.18% YoY, dominated by increases in prices of farm produce and staple food prices. Dissecting the food basket, farm produce and imported food prices expanded 33bps and 4bps to 15.37% and 16.3% YoY respectively, to more than offset the 207bps decline in processed foods to 13% YoY. According to FEWSNET, livestock prices have increased by between 20% to 30% during the lockdown relative to the pre-COVID-19 period across most markets. Also, prices of staple foods (including maize, rice, millet, sorghum, and yams) are above the level in 2019 and the five-year average, as prices increased 65% to 120% between January and May. Excluding farm produce, the headline index would have been flat at 10.13% YoY. The flat movement in the core index at 10.13% YoY negates the increases across constituents. Key components of the core basket expanded, starting with HWEGF (+10bps to 7.86% YoY), Transport (+33bps to 10.41% YoY), Communication (+19bps to 8.62%), Health (+42bps to 11.09% YoY), clothing (+10bps to 10.48% YoY), amongst others.