Inflationary Outlook Continues to Worsen

Ghana’s inflation outlook worsened further with no end in sight after the inflation rate began the last quarter of the year climbing to its highest since March 2001. The annual inflation print for October came in red hot at 40.4%, up from 37.2% recorded in September. Month-on-month inflation between September and October 2022 went up by 2.7%, picking up steadily from a modest reading in the previous month.

Consumer prices continue to see drastic increases as a sharp decline in the value of the local currency coupled with the galloping prices on petroleum products and transport costs add significantly to consumer expenditures. October’s consumer price data revealed that 306 items out of the observed 307 items in the inflation basket saw price increases. The data also showed that six of the observed inflation items registered over a 100% increase over a one-year period with Diesel topping at 155.6%. It is expected that the inflation rate will continue to remain elevated as economic activities rise in the festive season.

Food inflation recorded its biggest nominal increase for 2022 in October at 43.7%, up from 37.8% in September. Month-on-month food inflation rose for the second consecutive time to 3.2% in October, having risen from a 2022 year low of 1.8% in August. Food inflation was driven predominantly by water at 64.3% and sugar & confectionery at 58.9%.

Non-food inflation stayed on a rather calmer tone, picking up from 36.8% in September to 37.8% in October. Month-on-month non-food inflation rose from a seven-month low of 1.7% in September to 2.3% in October. Annual non-food inflation’s biggest driver was Housing and utilities at 69.6% with the biggest month-on-month driver being Alcoholic beverages at 3.8%.

Across the regions, inflation ranged from 27.0% in the Upper West region and 51.1% in the Eastern region. Inflation on imported items continued to surpass that on local items as the gap between the two numbers widened to 4.6%. Inflation on imported items came in at 43.7%.

The monetary policy committee is expected to have its last sitting in 2022 later in November where committee members will have to battle with the dilemma of what magnitude to raise the policy rate to at a time when the cost of credit is already adding to the inflationary pressures.