In brief
- Annual CPI inflation declined for the third consecutive month in June 2024, edging down by 30bps to 22.8% year-on-year (vs the median expectation of 22.5%). On a sequential basis, headline inflation also came in 30bps lower at 2.9% m/m in June 2024. We drilled deeper into the CPI data and observed that the sluggish disinflation in June 2024 was underpinned by the impact of seasonality in prices of agrarian products as lean supply in the planting season propelled food prices.
- Although our disinflation expectation was realized, the magnitude of decline was more sluggish (-30bps) than we had projected for the annual print (-120bps). Specifically, the realized decline translated into only 25.0% of our forecast disinflation for June 2024 and represents the third consecutive month of slower-than-expected disinflation. This emphasizes the elevation in Ghana’s inflation profile, which suggests a canary in the coal mine against the authorities’ year-end inflation target of 13.0% – 17.0% under the IMF’s Monetary Policy Consultation Clause.
- While we stress that it may be premature to judge the risk of protracted divergence between food and non-food inflation as observed between May and July last year, we are equally minded by the impact of seasonality in food prices. We note that the annual closed fishing season commenced on 01st July 2024 with a one-month observance for artisanal fishing and two months for industrial trawlers. This could sustain the price pressure for fish & other seafood in July before easing slightly in August 2024.
- For non-food inflation, the implementation of new utility tariffs and higher ex-pump petroleum prices with effect from 01st July 2024 will pose a double whammy of upside risk to annual and monthly inflation. During the second quarter utility tariff review, the sector regulator indicated that the electricity tariff hike of between 3.45% and 5.84% will still leave a revenue under-recovery of GHS 906.2mn to be recovered in subsequent quarters. In our view, this raises the upside risk to inflation in 2H2024, subject to downward pressure from food harvest in late-3Q2024. Against this backdrop, we raise our FY2024 annual inflation forecast by 340bps to between 19.3% – 21.3%.
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