Business News of 2014-09-04

Consumers' purchasing power drops

Prices of some commodities on the local market have shot up since January 2013 by an average of 50 per cent, even though the annual rate of inflation for last month showed a 15.3 per cent hike in the general price level of goods and services.
The reduction of the cedi’s purchasing power, due to both foreign exchange dynamics and inflation, has led to food and non-food items becoming more costly. While imported goods have become more expensive, the costs of production for locally produced items have likewise risen.
A market survey by the Graphic Business show that fuel costs have in turn pushed prices of transport upwards, which has led to the movement of physical goods across the country and their respective prices having greater costs as a result.
This means for any wage payment made one year ago, the value of that pay has reduced by almost 50 per cent. With the rate of inflation at its highest in four years, the consumer’s disposable income is being strained.
This year, the cedi has depreciated by 33 per cent against the US dollar, while the price of petrol has risen by 53 per cent. At the begining of the year, the Public Utilities Regulatory Commission (PURC) increased prices of electricity and water by 9.73 per cent and 6.80 per cent respectively.
In July2014, the regulator also a 6.1 per cent increase in water tariff and 12 per cent in the tariff for electricity.
Price disparities
Consumer goods such as eggs, milk, milo and sugar have all seen rapid increases in their prices. Vegetables, rice, cooking oil and textiles are all following the same trend, and even for an agrarian economy, prices of staple foods such as cassava, plantain and yam have all shot up.
A crate of eggs, which sold for GH¢10 when the year began, is now selling for GH¢15. A tin of milo is now being sold for GH¢12 compared with GH¢6.5 at the beginning of the year. Similarly, a tin of ideal milk which was GH¢1.20 is now GH¢2.50.
Consumers bought an ‘olonka’ of sugar for GH¢6 when the year began, but will need GH¢4 more to buy the same quantity today. A five kilogramme bag of rice (Gino brand) is now GH¢37, although it was sold for GH¢18 when the year began. A gallon of cooking oil is now being sold for GH¢28 compared to GH¢18 for a gallon in January.
Car owners were buying a litre of petrol for GH¢2.33 in January 2014, but as of August 2014, a litre is GH¢3.67.
At the popular Agbogbloshie market in Accra, where prices of food stuffs are relatively cheaper, a small paint bucket of tomatoes which sold for Gh¢5 when the year began has more than tripled as it is now GH¢25.
Even popular staple foods such as yam, cassava and plantain have become relatively expensive in the market now. Previously, one could get some tubers of cassava for GH¢0.50p, and with GH¢2 consumers could get some few fingers of plantain at Agbogbloshie. A tuber of yam was also sold between GH¢3 and GH¢5 but now a single tuber is sold between GH¢8 and GH¢10.
Consumers need between GH¢2-5 to get some fingers of plantain and for cassava, one needs between GH¢2 and GH¢10.
Regarding textiles, prices of both locally manufactured and imported textiles have increased over the period. A yard of ‘Hi-target’ type was GH¢4 but is now GH¢7 a yard. A yard of polished cotton is now sold for GH¢13 compared to GH¢10 at the beginning of the year.
For the locally printed fabrics, a yard of Woodin was GH¢9 but is going for GH¢16. Similarly, six yards of GTP was GH¢50 but it is now priced at GH¢62. A yard of tissue lace is also going for GH¢15 a yard compared to GH¢11 when the year began.
A can of Nivea spray which sold for GH¢5 at the beginning of the year, is now going for GH¢9, meaning consumers have to spend an additional 80 per cent (GH¢4.00) to acquire the same product.
Prices impacting inflation
The increase in the price of goods and services on the local market confirms data on inflation released by the Ghana Statistical Service (GSS), from January till date.
Inflation, measured by the Consumer Price Index (CPI), looks at the average movement of goods and services acquired by people for the purpose of consumption.
From the beginning of the year, inflation has been on the rise largely due to the increase in the price of petroleum products and the fast depreciation of the cedi to peg at its current rate of 15.3 per cent (July 2014).
This year alone, the National Petroleum Authority (NPA), the statutory agency regulating operations in the downstream petroleum industry, has reviewed petroleum prices up more than twice.
In January, the price of petrol was increased by six per cent to sell at GH¢2.33 per litre, while kerosene also went up by 19 per cent.
In April, the NPA again revised upward prices of petroleum products. Petrol was increased by 7 per cent to sell at GH¢2.37 per litre. Kerosene was also increased by 0.38 per cent to sell at GH¢2.36.
In July, petrol saw an increase of 23.08 per cent to sell GH¢3.36 a litre, while the price of kerosene also increased by 23.75 per cent from GH¢2.61 a litre, to GH¢3.23 a litre.
The hikes in petroleum prices have a pass-through effect on almost everything in the country, and once this happens prices of goods naturally go up.
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