High food prices in north pushes July inflation to 9%

The continuous rise in food prices, especially in the northern part of the country, has shot overall inflation up again in July, making it the highest rate since April 2021, data from the Ghana Statistical Service (GSS) has shown.

According to the data released yesterday, July recorded an inflation rate of 9 per cent, up from the 7.8 per cent recorded the previous month. Like June, the main driver pushing inflation upward is food prices, but this time, rather surprisingly, it came from an unlikely region, the northern part of the country.

Food prices in the Upper West and Northern Regions recorded inflation of 20.3 per cent and 20.5 per cent, respectively, whereas that of the capital recorded 9.5 per cent. This consequently ended a 16-month cycle of the Greater Accra Region persistently recording the highest overall inflation rate, as it recorded a rate of 11.7 per cent, compared with 13.8 and 13.5 per cent for Upper West and Northern Regions, respectively.

In all, the food basket recorded inflation of 9.5 per cent, up from the 7.3 per cent in June, thereby taking the basket’s contribution to national inflation to 47 per cent, compared with 41.8 per cent in the previous month. Food items that led the pack in the month were vegetables, cereal products, live animals and meat, and ready-made food.

The non-food basket, on the other hand, recorded an inflation rate of 8.6 per cent, also up from the 6.2 per cent recorded in June.

Also, the gap between inflation for locally produced items and imported ones continue to widen, as the former saw rate increased by 1.5 percentage points to record 9.4 per cent, while the latter saw a marginal uptick to 7.1 per cent from 7 per cent.

More than three-quarters of the rate of inflation recorded in July 2021 was contributed by food and non-alcoholic beverages: housing, water, electricity and gas and transport.

Inflation forecast and target

The government has targeted inflation to fall within the medium-term band of 8-10 per cent at the end of the year.

The IMF Article IV report states that pressures from higher fuel and import prices and budget revenue measures could push inflation to 9.6 per cent by the end of 2021 before returning to target next year.

The Monetary Policy Committee (MPC) of the Bank of Ghana also noted in its July report that, since the beginning of the year, headline inflation in several advanced and emerging market economies have picked up sharply above targets, driven mainly by energy price pressures, and supply constraints amidst increased consumer demand as economies re-open.

However, it adds, the expectation is that over the medium-term, headline inflation will return to target, moderated by the still sizeable spare capacity, slack in labour market conditions and restrained wage growth. In emerging market and frontier economies, the pace of price movements would be dictated by currency movements and Covid-related supply-side constraints.

Despite this, the committee expressed confidence that inflation will remain within the target band.

“Headline inflation has eased sharply and reverted within the medium-term target band, driven mainly by the tight monetary policy stance and some base drift effects. The latest forecast remains broadly unchanged with inflation projected to remain within band and around the central path in the forecast horizon barring any upside risks from fiscal pressures,” the report said. Read Full Story