The latest report from the NBS has headline inflation y/y at 12.5% in April. This is in line with our expectation shared with wire services. April’s report marks the fifteenth successive monthly slowdown, and by a healthy 86bps on this occasion. The principal driver was a decline in food price inflation from 16.1% to 14.8% y/y. Core inflation also slowed, from 11.2% to 10.9% y/y.
- On a m/m basis, the headline rate slowed marginally from 0.84% in March to 0.83%. The m/m rate has been below 1.0% since July 2017, which points towards some level of price moderation.
- Food price inflation y/y has slowed significantly for five successive months. The fact that comparable year-earlier rises were +/- 2.0% m/m has helped. Since there has been little change to the familiar supply-side constraints, poor logistics channels and some farmers’ preference to export their produce, it appears that some harvests have improved.
- Imported food prices increased to 16.2% y/y from 15.9% in March. Since mid-2017 fx has been available and the rate broadly stable. Therefore, we assume higher US dollar prices for products have fed into imported food inflation.
Sources: National Bureau of Statistics (NBS); FBNQuest Capital Research
- We see the headline rate falling again to 11.3% y/y in May. The positive base effects are set to run through to June/July.
- The monetary policy committee (MPC) meets next week, and will have access to the favourable inflation reports for March and April. However, the signals from members’ latest personal statements suggest that the committee will not rush to adopt an easing stance.Sources: National Bureau of Statistics (NBS); FBNQuest Capital Research
- We see the headline rate falling again to 11.3% y/y in May. The positive base effects are set to run through to June/July.
- The monetary policy committee (MPC) meets next week, and will have access to the favourable inflation reports for March and April. However, the signals from members’ latest personal statements suggest that the committee will not rush to adopt an easing stance.
