Prices largely subdued in second half of the year

Accra, Aug. 10, GNA - After experiencing some rise in inflation during the first quarter of the year, mainly on account of the 50 per cent rise in petroleum products in February, price increases have been largely subdued in the second quarter.

The Economic Development Report for July by the Monetary Policy Committee (MPC) by the end of June 2005, the year-on-year headline inflation had dropped to 15.7 per cent. Yearly average inflation as at end June 2005 stood at 14.2 per cent.

The MPC noted that by the end of March 2005, inflation had risen by 5.1 per cent to 16.7 per cent from the end year level.

"The rise in consumer prices was generalised everywhere," it said, pointing out that items that recorded higher increases and contributed to the rise in inflation over the quarter were maize, imported rice, cassava, garden eggs and tomatoes (for food prices).

The major non-food prices that recorded significant increases were kerosene, petrol, transportation fares among others.

The MPC said movements of the various indices of the consumer price index indicated that the transportation and communications as well as the housing and utilities sectors recorded the sharpest increases following the adjustment in petroleum prices.

These sectors recorded respective increases of 25.2 per cent and 16.5 per cent. Price increases for the other sectors, however, ranged between 4.4 per cent - 8.5 per cent.

At the end of the second quarter of 2005, it was evident that consumer price inflation in the economy had reverted to normalcy with rates between April - June 2005 lower than trends observed in 2004. "The slowdown in the overall index is a reflection of the continued moderation in the increases in the non-food index and the fact that the food supply situation has turned in better than a year ago.

"A continued slowdown in the growth of these indices over the next three months should help push down the rate of inflation further." The MPC said on the whole food prices for the second quarter of 2005 increased by 6.5 per cent compared with a second quarter increase of 8.1 per cent in 2004.

With the exception of June 2005 when the non-food price index turned in lower than what was observed in June 2004, the months of April and May 2005 saw non-food prices increase faster relative to trends a year earlier.

"The price development the month of June depicts is consistent with expectations. General increases in the price indices have eased considerably and this is expected to be maintained till the end of the year."

The MPC said the outlook is for continued consolidation on the path toward low and stable inflation with relative exchange rate stability, providing a basis for increased GDP growth, given the economic fundamentals and also prudent implementation of the fiscal and monetary framework and the supporting policies for 2005.