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Inflation rises despite waning momentum

In October, headline inflation decelerated to 1.73% m/m (Sep’23: 2.10% m/m). The m/m slowdown in inflation was on the back of broad-based slowdown in both food and core inflation. Notably, food inflation decelerated to 1.91% m/m (Sep’23: 2.45% m/m) while Core inflation slipped to 1.42% m/m (Sep’23: 2.06% m/m). Overall, headline inflation rose by 61bps to settle at 27.33% y/y (Vetiva: 27.58%).

Food inflation: High farmgate prices keep food inflation above 30% Amid the harvest season, food inflation decelerated to 1.91% m/m. This was driven by a slowdown in processed food inflation (-0.77 ppt), while farm produce inflation (+0.85 ppt) remained high and entrenched. As a result, food inflation surged to a new 18-year high of 31.52% y/y in October (Sep’23: 30.64% y/y).

Outlook: Inflation will remain on the uptrend in November In November, we see headline inflation ascending to 27.72% y/y. We hinge this on slight exchange rate gains in November as well as the lingering passthrough of high energy prices. As a result, we modify our full-year headline inflation expectation to 24.40% y/y in 2023 (2022: 18.76% y/y).