The consumer price index (CPI) which measures inflation went down marginally by 0.06 percent points lower than the 11.08 percent recorded in July 2019 to 11.02 percent (year-on-year) in August 2019.

Accordingly, disinflation continued in August 2019 despite several pronouncements regarding restrictions on the import of some food items, minimum wage, and the recent border closures.

Further analysis showed that the performance was driven by year-on-year and month-on-month disinflation by food and core inflation sub-indices.

Notably, the rate of acceleration in the food inflation slowed, as the sub-index shed 0.22 percent to 13.17 percent year-on-year and 12bps to 1.22 percent month-on-month, respectively.

This was complemented by sustained decline in the core inflation sub-index (down 0.12 percent to 8.68 percent year-on-year and 0.11 percent to 0.67 percent month-on-month).

Furthermore, the harvest season and existing weak consumer demand and their natural effect to slow down food and other prices will also play a major role in determining the direction of inflation.

Against this backdrop, in August 2019, all major indices slowed except urban inflation year-on-year.

On month-on-month basis, the headline index increased by 0.99 percent in August 2019. This is 0.02 percent rate lower than the rate recorded in July 2019 (1.01) percent.

The percentage change in the average composite CPI for the twelve months period ending August 2019 over the average of the CPI for the previous twelve months period was 11.271 percent, showing 0.02 percent point from 11.291 percent recorded in July 2019.

The urban inflation rate increased by 11.48 percent (year-on-year) in August 2019 from 11.43 percent recorded in July 2019, while the rural inflation rate increased by 10.61 percent in August 2019 from 10.64 percent in July 2019.

On a month-on-month basis, the urban index rose by 1.04 percent in August 2019, down by 0.03 from 1.07 percent recorded in July 2019, while the rural index also rose by 0.93 percent in August 2019, down by 0.03 from the rate recorded in July 2019 (0.96) percent.

The corresponding twelve-month year-on-year average percentage change for the urban index is 11.62 percent in August 2019.

This is less than 11.64 percent reported in July 2019, while the corresponding rural inflation rate in August 2019 is 10.95 percent compared to 10.97 percent recorded in July 2019.

Reacting, analysts at United Capital said: “For the month of Sep-19, we expect several factors to have a push and pull effect on the headline inflation figure. Historically, the month of September has been recording month-on-month decline for three consecutive years.

“However, due to recent developments around border closure and the implementation of the restriction of FX for imports of dairy products, we expect these developments to overshadow the supply of new produce from the ongoing harvest season.

“Accordingly, we expect pressure on food inflation sub-index to resurface, while the core inflation should remain tepid amid the continued regulation of PMS prices and relative stability of FX rate.

“Additionally, we expect the headline inflation rate to increase, partially due to the low base effect of Sept-18. Therefore, month-on-month and year-on-year headline inflation should inch marginally upwards, at an estimated value of 1.0 percent and 11.19 percent, respectively, with the latter remaining above 11.0 percent threshold.”

However, for the rest of the year, the analysts said: “For the rest of the year, with hopes on final implementation of the new minimum wage, coupled with the CBN’s renewed drive to include more food items on the restricted-FX list, and expected festivities, we could see multiple forces pressuring inflation rate higher.

“As a result, we estimate headline inflation to be sticky between 11.0 percent and 11.4 percent, averaging 11.3 percent in H2-19. Additionally, following the president’s pledge not to interfere with the price of PMS, energy prices might not receive a significant upturn this year.”

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