Inflation drops to 4.8%

Sep 01, 2015

Data from the statistics house shows that average annual headline inflation has reduced by 0.6 percentage points to 4.8% in August due to lower food, fuel, energy and utility prices

By Racheal Nabisubi & Samuel Sanya

Data from the statistics house shows that average annual headline inflation has reduced by 0.6 percentage points to 4.8% in August due to lower food, fuel, energy and utility prices.


The Consumer Price Index (CPI), the official measure of inflation is the rate at which prices rise over a given period of time. Annual headline Inflation dropped from 5.4% in July 2015.

Some data collection centers like Kampala Middle and Low Income, Masaka and Kampala high income experienced higher inflation than other regions at 6%, 5.5% and 5.1% respectively due to high prices of clothing, footwear, rent, meals in restaurants and other goods and services.

The annual core inflation, a component of headline inflation which excludes food, fuel, electricity and metered water prices rose to 5.5% in August from 5.4% in July.

Core inflation is used as a basis for setting the benchmark Central Bank Rate (CBR) which in turn affects commercial bank lending rates. A rise in core inflation can lead to a rise in lending rates.  

In annual terms between 2015 and 2014, food inflation declined to 5.1% at the end of August from 6.8% in July. However, in monthly terms, food inflation increased by 0.5% in August from 0.4% in July.

In August, Irish potatoes, cassava, passion fruits, pineapples, oranges, sweet bananas, avocado, cabbage, tomatoes, onions, carrots, bitter tomatoes, eggplant, maize flour, beans and ground nuts where cheaper.

However, matooke, sweet potatoes, tangerine, mangoes, fish and sugar were more expensive. Food prices are the single largest determinant of headline inflation with a weight of 27%.

“Uganda being an agricultural country, environmental changes determine the rate of inflation. For instance, there is a large quantity of food supply on the market,” Dr. Chris Mukiza, the UBOS director macro-economic statistics told reporters in Kampala.

“General Price levels are up but the rate at which prices are accelerating is lower than what was recorded in July,” he added.

He also attributed the drop headline inflation to the decline in annual energy, fuel and utilities (EFU) which decelerated to 3.9%from 6.0% that was recorded the previous month.

Everest Kayondo, chairman of Kampala City Traders Association (KACITA) downplayed the effect of higher food supply in regional markets, saying that is actually low incomes that are bringing down prices.

“Yes, it is harvesting season and there are a lot products on the market but the people are poor. They do not have enough resources to buy off the goods and services availed to them,” Kayondo explained.

He added that the impact of the struggling shilling has effected almost every individual because from their sales whether locally or international have costs incurred. The shilling has lost more 24% value against the dollar since the year started.

Kayondo explained that declining shilling affects everyone in the country both directly and indirectly. He said that even charcoal sellers who do not import their raw materials have to pay a bit more for soap, cooking oil and other essentials that are affected by the expensive dollar.


 

(adsbygoogle = window.adsbygoogle || []).push({});