SUN 19 DEC, 2021-theGBJournal- According to the recently released data from the National Bureau of Statistics (NBS), headline inflation moderated by 60bps to 15.40% y/y in November 2021 – the eighth consecutive month of decline and the lowest since November 2020 (14.89% y/y).
The headline inflation print was 8bps higher than our estimate (15.32% y/y), with the deviation stemming from the core basket. On a month-on-month basis, the headline CPI reversed the downtrend witnessed in October as it increased by 10bps to 1.08%.
Food inflation slowed by 113bps to 17.21% y/y – the lowest since September 2020 (16.66% y/y). The sustained moderation in the food basket reflects the impact of the favourable base from the prior year.
Accordingly, price deceleration was witnessed across the Farm produce (-164bps to 16.67% y/y) and Processed food (-98bps to 17.36% y/y) sub-baskets. However, on a month-on-month basis, food inflation rose by 16bps to 1.07% m/m as the festive-induced demand magnified the impact of the below-average primary harvest season. Notably, the highest price increases in the food basket were recorded in Bread and cereals, Fish, Potatoes, yam and other tubers, Oil and fats, Milk, cheese and eggs and Coffee, tea and cocoa.
Elsewhere, core inflation (+61bps to 13.85% y/y) resumed an uptrend after the moderation recorded in the prior month. We think the increase was due to the troika impact of (1) festive-induced demand in the recreation sub-sector, (2) higher energy prices, and (3) pass-through impact of currency depreciation at the parallel market.
Accordingly, the most significant price pressures were recorded in the Restaurants & hotels (+23bps y/y), Education (+18bps y/y), Furnishings & household equipment maintenance (+16bps y/y) and HWEGF (+14bps y/y) sub-baskets. Similarly, on a month-on-month basis, the core index was also up by 46bps to 1.26% (October: 0.80% m/m).
We expect the pressure on food prices to be sustained on a month-on-month basis in December as supply challenges collude with more festive induced demand to widen the supply gap further.
Similarly, we expect the core inflation index to increase, albeit moderately, on account of the expected mild increase in energy prices amidst stable PMS prices. On balance, we now expect the headline CPI to rise by 1.10% m/m, translating to a 59bps moderation in y/y inflation rate to 14.81% y/y in December.- .-with Cordros Research
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