October 2021 Inflation Report: Downtrend Sustained for the Seventh Consecutive Month
- Headline inflation softened further in October to 15.99% YoY from 16.63% YoY in September, representing the seventh consecutive monthly decline since April 2021. The slower pace of growth in prices is majorly due to a softer 18.30% YoY (19.60% in September) rise in the food index as the full effect of the harvest season set in. Core inflation also grew at a slower pace at 13.24% YoY in October (13.74% in September) despite sharper price increases in 9 of 11 sub-components of the index especially in HWEGF (+0.12% YoY), Clothing and Footwear (+0.17% YoY), and Transport (+0.07% YoY) which accounts for 60.20% of the index.
- A month-on-month analysis reveals a similar picture as headline inflation declined 17bps to 0.98% in October due to a 35bps decline in food inflation to 0.91% although imported food inflation remained constant at 1.36%. The core index also eased by 45bps to 0.80% in October, further supporting the downtrend in headline inflation.
- The slower growth in food inflation reflects the effect of increased supply from full-blown harvest season in October on price growth and this should continue to ease pressures on the food basket in 2021. While the driving forces for the core index remain unclear, we expect the index to remain range-bound in the meantime, should the stability in the FX market be sustained. On a YoY basis, we expect the base effect from 2020 to keep headline inflation on a downtrend in 2021. However, month-on-month numbers would likely reflect festive-induced demand and travels on prices as we approach the end of the year.
- On the market front, negative real yields persist as yields continue to decline faster than the pace of moderation in inflation, no thanks to elevated system liquidity. We expect that the monetary policy committee would leverage moderating inflation to maintain its current dovish stance as Q3 GDP numbers are expected to reflect sustained recovery in economic growth.
ARM Securities Limited is a full-service brokerage house that offers best-in-class brokerage services to local as well as foreign private and institutional investors. Formerly known as Hamilton Hammer, the Company commenced operation in 1994 and was acquired by ARM Investment Managers in 2008--an acquisition which has successfully re-positioned the company as a recognized brokerage firm in Nigeria. The Company is a dealing member of the Nigerian Stock Exchange (NSE) and is regulated by Securities and Exchange Commission (SEC). ARM Securities research team provides insightful commentaries on the Nigerian economy and its equity and debt markets using an approach which incorporates a thorough understanding of the fundamentals of the industries and companies under coverage. The research therefore adopts an integrated methodology of top-down analysis and bottom-up stock selection, which focuses on publicly quoted companies on the Nigerian Stock Exchange that are judged to offer the highest potential for earnings growth. In addition, its analysts provide periodic commentaries on a range of topical global and local issues which provide investing clients with a holistic view of the opportunities and risks in today’s financial market landscape.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.