Inflation Begins Second Half of the Year on an Upward Trajectory

The consumer price index nudged up from last month’s level to begin the second half of the year at a three-month high as risks to the inflation outlook continue to persist. Expectations of higher inflation numbers mainly on the back of a surge in the prices of food items prompted the government to review its year-end inflation target. Consequently, the government revised its end-period inflation target for 2023 from 18.9% to 31.3%. The consumer price index is further expected to be pressured by the marginal decline in the value of the local currency amid some increases in the prices of petroleum products at the pump.

Data released by the Ghana Statistical Service revealed that the inflation rate posted its third successive increase to 43.1% in July, up from 42.5% in June. Month-on-month inflation rate similarly ticked higher from 3.2% in June to print at 3.6% in July as a marginal decline in the month-on-month inflation for food items failed to normalize the significant increases in the non-food and alcoholic beverages category.

Annual food inflation rose for the third consecutive time to print at 55.0%, having steadily risen from a 2023-year low of 48.7% in April. The increase in food inflation was led by Tea which recorded a 150.0% annual increase and cocoa drinks with a 21.3% surge over the past 1 month. On a monthly basis, food inflation declined marginally to 3.8% in July from 3.9% in June.

Inflation on non-food and alcoholic beverages rose for the first time in July after months of assuming a downward trajectory. Annual inflation on non-food items tightened by 40 basis points to print at 33.8% in July from 33.4% in June. Month-on-month non-food inflation similarly posted an increase from 2.6% in June to print at 3.4% in July.

Across the regions, the inflation rate hovered from 31.8% in the Greater Accra region to 64.0% in the North East region. Inflation on local items posted its first increase in 2023 to 37.5% in July from 35.9% in June whilst that on imported items rose from 44.5% in June to 45.7% in July.

As expected, the July sitting of the Monetary Policy Committee saw the central bank resume its hard stance against price pressures spinning out of control with the committee warning that Ghana’s macroeconomic framework requires decisive tightening from both the fiscal and monetary side to anchor inflation expectations firmly on a declining path.