FREE

April 2020 Inflation Review - Inflation accelerates amid pandemic risk, Ramadan arrival

 In the latest report from the National Bureau of Statistics (NBS)​,​ the overall consumer price index - a measure of the average change in prices over time of goods and services purchased by consumers - was up 12.34% y/y in Apr’20  from 12.26% y/y in Mar’20. Retail inflation inched higher on the back of a faster rise in both food and core prices. Annual food inflation accelerated to 15.03% y/y in Apr’20 (Mar’20: 14.98% y/y) while core inflation printed at 9.98% y/y (Mar’20: 9.73% y/y). Prices of food items like bread, fish, tubers, vegetables & fruits and bread & cereals were the main drivers of inflation in Apr’20.

COVID-19 price premiums inflate core prices y/y

Save for the Housing, water, electricity, gas and other fuel sub-index, all the other sub-indices recorded a faster rise in prices compared to Mar’20. However, core prices rose y/y at a faster pace (+25bps) than food prices (5bps). This was due to a faster rise in prices in some COVID-19 prone sectors (health, transport and restaurant & hotels) compared to food prices. The faster rise in prices in the vulnerable sectors reflects price premiums for services, amid steady demand, due to increased risk associated with rendering those services. Specifically, we note that the prices of health and transport services rose 23bps and 22bps m/m respectively in Apr’20.

Inflationary pressures mount on supply disruptions

In the current month, we expect the headline inflation to print at 12.43% y/y, due to an anticipated rise in both food and core inflation. We expect food inflation to rise further to 15.09% y/y, as mobility restrictions persisted in May with more states involved from the start of the month. We also expect core inflation to inch higher to 10.07% y/y, as we anticipate that the pressure on transport and health service prices will persist through the month.