March 16, 2022/InvestmentOne Report

Please click to download our February 2022 Inflation Update

• The Inflation numbers for February 2022, as recently released by the National Bureau of Statistics, showed a reversal in the downward trend witnessed in recent times. According to the report, inflation accelerated to 15.70% y/y in February 2022 (from 15.60% y/y in January 2022).
• However, food inflation declined slightly to 17.11% y/y compared to 17.13% y/y printed in the previous month. We posit that the high base effect in the previous year continued to drive the southward movement in the index. The month-on-month reading was reflective of the relative increase in food prices in February given the pass-through effect of higher logistics cost. Specifically, the food index expanded to 1.87% m/m, 25bps higher than January figures.
• Elsewhere, core inflation jumped to 14.01% y/y in February 2022, an increase of 14bps compared to the previous month. In the same vein, it settled at 1.33% on a m/m basis – higher than 1.25% recorded in January 2022.
• Going forward, we believe that inflationary pressures will likely be biased to the upside in the near term given factors such as (1) global increase in commodities prices and its attendant impact on imported food index (2) ripple effect of the higher energy prices on the core index (3) FX liquidity challenges and (4) reduction in food supply as the harvest season ends.