Flood, Insecurity Drive Higher Food Prices As October inflation Spikes

 

Continued increase in food prices, occasioned by herdsmen attacks on farmers and recent episodes of flooding which undermined food supply across the country may see inflation rate rise for the third consecutive month in October.

This was the consensus of analysts’ projections from FSDH Merchant Bank and Financial Derivatives Company (FDC) Limited. Recall that after 18 months of decline, inflation rate (year-on-year) rose in from 11.14 percent  in July to 11.23 percent in August and further to 11.28 percent in September.

While the National Bureau of Statistics (NBS)  is scheduled to release the inflation figures for October next week, analysts at FSDH Merchant Bank  and  FDC  projected 11.34 percent  and 11.35  percent  inflation rates respectively  for  October, citing  continued impact of rising food prices.

They however noted that the stability of the exchange rate, increased power output and lower liquidity in the interbank money market had moderating effect on the inflation rate in October. “FSDH Research expects the inflation rate (year-on-year) to increase further to 11.34 percent in October 2018 from 11.28 percent recorded in September.

The expected increase in the inflation rate will reflect higher prices observed within the Food and Non-Alcoholic Beverages division”, said FSDH analysts.

FDC analysts on their part stated: “Headline inflation is projected to increase marginally by 0.07 percent to 11.35 percent in October. If our projections are accurate, it will mark the 3rd consecutive month of rising inflation after a sustained period of declining price level.”

Inflation drivers On the main driver of inflation rate in October, FSDH analysts said: “The prices of food items that FSDH Research monitored in October 2018 moved in varying directions, and led to an overall 0.95 percent  increase in our Food and Non-Alcoholic Index. This Index increased year-on-year by 13.37 percent to 290.22 points, up from 255.99 points recorded in October 2017. We also observed an increase in the prices of Transport and Housing, Water, Electricity, Gas & Other”.

FDC analysts however listed higher food prices, increase in retail price of diesel and currency pressure in the Investors and Exporters (I&E) window as factors that drove up inflation in October.

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