Food price volatility rises November inflation to 2.1%

Nov 30, 2014

The Consumer Price Index (CPI) – the official measure of inflation – released by the Uganda Bureau of Statistics (Ubos) shows that inflation rose to 2.1% in November.


By Faridah Kulabako

Uganda’s inflation rate edged higher in November on the back of volatile food prices.

The Consumer Price Index (CPI) – the official measure of inflation – released by the Uganda Bureau of Statistics (Ubos) on Friday shows that inflation rose to 2.1% in November from 1.8% posted in October.

According to Sam Kaisiromwe, a senior statistician at Ubos, high food prices have been due to reduced supply to markets.

Food inflation, which accounts for the biggest percentage of goods and services that are used to measure inflation, increased to -1.6% compared to -2.7% recorded in October.

The rise in inflation means that Ugandans have to pay a little more for a similar basket of goods as compared to the previous month.

Panic mode

Stephen Kaboyo , the managing director of Alpha Capital Partners recently warned that the persistent weakening of the shilling could drive up inflation if the Central Bank does not take immediate action to arrest the decline.

The weakening of the local unit against the dollar means traders need more shillings to buy a dollar, which increases operational costs from higher import prices. This, in turn, increases inflation because of its spillover effects.

On Friday, the shilling plummeted to sh2,790 per dollar, driven by the surge in demand by importers and Central Bank purchases.

Kaboyo noted that if the shilling weakens further, the market could slip into a panic mode.

It is also worth noting that the Energy, Fuel, Utilities (EFU) decreased to 2.2% compared to 2.5% in October.

The annual core inflation – which excludes food crops and metred water, which are volatile to price changes – on the other hand declined to 2.3% for the year ending November from 2.4% posted in October.

This was attributed to the global decline in fuel prices, which has seen pump prices decline marginally.

Despite the slight increase in the annual headline inflation, core inflation remains below Bank of Uganda’s target of 5%.

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