Business News of 2014-07-15

High imports pushing inflation up

Data available from the Ghana Statistical Service (GSS) has indicated that consumer preference for imported items rose in the month of June as level of import also continued to soar.
This, according to the service had accounted for a rise in the inflation rate for imported items from 18.9 per cent in May 2014 to 19.1 per cent in June. The rates are about one and half times higher than the inflation rate for locally produced items which was 13.5 percent.
The Government Statistician, Dr Philomena Nyarko stated that the inflation rate for imported goods has been on the rise since January 2014 recording a rate of 14.5 per cent.
It rose to 15.6 per cent in February, then to 17.0 per cent in March. It later increased to 18.7 per cent in April and shot up again to 18.9 per cent in May. The high level of imports into the country has resulted in the decline in the value of the local currency which has partly contributed to the continuous rise in annual inflation.
Annual inflation
Meanwhile on the larger front, inflation for the month of June soared to 15 per cent, 0.2 percentage points up from the 14.8 per cent recorded in May. Inflation, which is measured by the Consumer Price Index (CPI), looks at the change in the general price level of goods and services that households acquire for the purpose of consumption.
The monthly change rate for June 2014 was 1.6 percent, against the 0.9 per cent recorded in May 2014. The food component of the inflation basket recorded a rate of 7.9 per cent in June, which is 1.0 percentage point lower than the 8.0 per cent recorded in May 2014. The non-food group also recorded a year-on-year inflation rate of 20.3 per cent in June 2014, compared to 20.0 per cent recorded in May 2014.
At the regional level, the Upper East Region recorded the highest regional year-on-year inflation rate of 18.3 per cent, followed by the Northern Region with 17.5 per cent. The Volta region recorded the lowest rate of 13.1 per cent.
BoG on inflation
The Bank of Ghana (BoG) has however attributed the upward trajectory of inflation to the reflection of the pass-through effects of adjustments in domestic petroleum prices, increased utility tariffs and transportation costs, as well as the sharp decline of the local currency, the cedi.
Governor of the Bank, Dr Henry Wampah at the press after its Monetary Press Conference in Accra last week, said although headline inflation had slowed on a month-on-month basis, it continued to drift further away from the target band of 9.5±2 per cent.
It subsequently projected a gloomy outlook for inflation for the remaining years explaining that “the persisting fiscal and exchange rate pressures have provided additional impetus to the worsening inflation outlook.”
“Other risks related to the inflation outlook include the recent rapid growth in monetary aggregates such as credit to the private sector and money supply. Our latest inflation forecasts which factor in possible petroleum price increases and liquidity conditions show that barring any significant shocks, inflation is likely to return to the target range of 9.5±2 percent by the last quarter of 2015,” he explained.