Inflation to hit 10.2%

A STUDY conducted by the Research Department of Databank has revealed that inflation, the average change in the price of goods and services, could increase to 10.2 percent for August 2010.

The survey, expected to be released on Wednesday in Accra, was led by Sampson Akligoh, a Senior Economic Analyst at the investment bank.

It pointed out that it was likely inflation could rise to double digits as the effects of the base period factor diminish and inflation converge towards its medium to long-term path.

It however stated that an increase in inflation for August 2010 would not trigger any average price spiral since the economy would continue to post ultra-low inflation figures going forward.

Clearly, favorable food prices in 2010 as well as the relative stable exchange rate environment, remains a major buffer this year. This could anchor the year-end inflation to between 10 and 11.5 percent, the report added.

The study further noted that unless food prices decline significantly, inflation would surge beyond 10 percent.

“There have been distortions to food supply due to this year’s rainfall pattern and this is projected to mitigate the extent to which food prices decline by the end of the third quarter.

“Clearly, this adds to the certainty of the anticipated average price increases. Recent utility tariff increases, implementation of the Single Spine Salary Structure (SSSS), and global crude oil price dynamics among others will continue to serve as upside risks.”

Meanwhile, consumer inflation declined further by six basis points to 9.46 percent in July. The food price increases were slower for June and July than for the same period in 2009, resulting in an inflation rate of 5.84 percent for the food.

The decline in food prices, according to the report, was in line with Ghana’s seasonal pattern.

Nevertheless, non-food inflation increased to 11.96 percent in July from 11.89 percent recorded in June.

The increase in non-food inflation for July was led by alcoholic beverages, tobacco and other narcotics.

Inflation continued its downward trend for the 13th consecutive month after it recorded 9.46 percent in July as against 9.52 percent recorded in June 2010.

The general price levels for July (0.82 percent) were lower than that of June 2010 (1.57 percent) but prices of goods surged up marginally in July.

The months of August, September and October generally record low inflation rates, but the Food and Beverages Association (FABAG) has noted that food crisis was looming in emerging economies like Ghana.

The prices of wheat and other cereals have jumped by more than 50 percent since June and are likely to rise further due to expectations of tighter supplies.