Lower food prices push down inflation

 By Samuel Sanya

Lower food prices due to increased supplies helped bring down annual headline inflation to 27% in December, from 29% in November, the statistics office announced on Friday.

The Uganda Bureau of Statistics (UBOS) noted that the figure was arrived from the data collected from December 1 to 15.

It does not include prices around the holiday season. 

 “Prices of food have been consistently coming down over the past three months due to the rains, which increased supplies on the market.

“This brought down the entire headline inflation figure,” said Vincent Nsubuga,  the UBOS principal statistician.

Annual core inflation, which excludes food crops, fuel, electricity and metred water, fell to 29.2% from 30.6%.

The statistics office said the average annual inflation rate this year was 18.7%, up from 4% in 2010, and the highest since 1992 when it stood at 54.5%. 

The headline inflation rate edged down 0.1% on a month-on-month basis, with food prices falling by 3.9% due to reductions in the prices of matooke, sweet potatoes, irish potatoes, cabbages, tomatoes, carrots, beans and ground nuts.

Non-food inflation has remained stable at 22.9% despite reductions in prices of charcoal and paraffin in most trading centres countrywide. 

“It is hard to predict whether the shilling appreciation coupled with slight fuel price reductions will translate into lower headline inflation figures in the coming months. The Central Bank knows better,” Nsubuga noted. 

“Experience shows that there is a time lag for the shilling appreciation to translate into lower inflation, while increases in fuel prices usually lead to increases in the general price level of all consumer commodities. 

“However, reductions in fuel prices are not always followed by a commensurate drop in commodity prices. 

“They tend to be sticky coming down,” Nsubuga explained. 

He observed that frequent power cuts, high interest rates, crop and cattle quarantines, the shilling depreciation and poor road infrastructure were the leading ingredients for the relatively high inflation figures this year. 

Arua leads with the highest headline inflation by centre at 40.4%, a drop from 43.8% in November. 

Other centres around the country recorded decreases in headline inflation of between 300 basis points to 90 basis points. 

Increased dollar demand by commercial banks saw the shilling shed off sh40 in value to trade at sh2,500/2,510 on Thursday evening.  

Double-digit inflation and a weak local currency had prompted public protests earlier this year over high food and fuel prices. 

But a round of increases in the Central Bank’s key lending rate seem to have finally put a halt on rising inflation, which also fell in November after reaching an 18-year high in October. 

The shilling has also recovered from an all-time low of 2,901 hit in late September.

However, it is still about 5.6% weaker than the dollar as of last week’s close.