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November 2019 Inflation - Headline inflation continues uptrend, prints at 11.85% y/y

In the recently released Inflation data for November 2019, the National Bureau of Statistics reported an increased headline inflation figure at 11.85% y/y, (Vetiva estimate: 11.86%, consensus: 11.80%) from 11.61% y/y in October. This rise was mainly driven by food inflation which came in at 14.48% y/y and 1.25% m/m. Core inflation also rose to 8.99% y/y from 8.88%y/y in October.

Food prices still lead inflation

From the results shown, the 14.48% y/y increase in food prices was driven by a huge jump in the price of frozen foods (fish and meat), fats and oil and cereals. This, as we alluded to in the previous report, stems from the effect of the closed borders on food supply. Although we had expected a stronger moderation in month on month inflation in October, based on the belief that the harvest season would kick in and moderate inflationary pressures stemming from the border closure, the decline was less than expected. Evidently, the effect of the harvest season could not subdue the pressure on demand as expected.

Core and food inflation to slow m/m in December

As is consistent with the festive season, we expect core inflation to moderate to 0.66% m/m but to increase to 9.17% y/y. This is despite the expectation of an increase in the prices of housing and transportation as a result of the festive season, as we believe that the moderating effect of the other components in this bucket would outweigh this increase.