Marginal decline in inflation

The latest inflation report from the NBS shows headline inflation y/y at 15.9% in November. This was the tenth successive slowdown, albeit by just 1bp on this occasion. Our expectation, shared with wire service polls of analysts, was 15.8% y/y. The core inflation increased to 12.2% from 12.1% recorded in October while food price inflation barely moved in the month, at 20.3% y/y.

The m/m increase in the headline inflation increased marginally by 0.78% in November compared with 0.76% recorded in the previous month. This represents the first rise in m/m inflation following five consecutive declines recorded since May 2017. Although a rise was recorded, m/m inflation remains below 1.0%, which still points towards some level of price moderation.

The y/y increase recorded in core inflation could be loosely linked to seasonal effects – that is, a surge in demand given the festive period against limited supply.

For imported food prices, there was a y/y pickup in November to 15.8% from 15.3% recorded in the previous month. However, on a m/m basis, it slowed marginally to 1.2% from 1.3% in October. Given the stability of the fx rate in the various windows in recent months, the y/y increase probably reflects a rise in the dollar price of individual food commodities. NAFEX turnover amounted to US$5.7bn in November according to FMDQ.

Marginal decline in inflation - FBNQuest Research

At its last meeting, the MPC noted the significant contribution of food prices to headline inflation and observed that the benefit of base effects on overall headline inflation had substantially reduced.

We see an unchanged headline inflation rate at 15.9% in December.

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