May 16, 2022/Cordros Report
In line with the lingering impact of higher transport costs and increased food demand-supply imbalance, consumer prices maintained an uptrend for the third consecutive month. According to the National Bureau of Statistics (NBS), headline inflation increased by 90bps to 16.82% y/y in April – its highest print since August 2021 (17.01% y/y). Decomposing the breakdown, we highlight price pressures across the food (+117bps to 18.37% y/y) and core (+26bps to 14.18% y/y) baskets. The headline inflation print is 16bps and 42bps higher than Cordros’ (16.66% y/y) and Bloomberg’s median consensus estimates (16.40% y/y), respectively. On a month-on-month basis, headline inflation rose by 2bps to 1.76% (March: 1.74% m/m) – tracking higher than the 2022 average of 1.65% m/m.
Unsurprisingly, food inflation maintained its uptrend for the third consecutive month, increasing slightly by 1bp to 2.00% m/m in April (March: 1.99% m/m). The increased food prices were consistent with the wider food demand-supply gap. For proper context, we highlight that the wider food demand-supply gap was underpinned by the increased demand associated with Ramadan and Easter during the review period. In our view, the preceding, combined with (1) high global food prices worsened by the Russia-Ukraine conflict; and (2) elevated transport costs, outweighed the impact of off-season harvests in the review period.
Elsewhere, the core inflation reversed the previous month’s downtrend, increasing by 24bps to 1.22% m/m (March: 0.98% m/m) in April. The increase was primarily due to the lingering impact of (1) higher global gas and energy prices and (2) increased taxes in line with the 2021 Finance Act. Consequently, price pressures were broad-based across all the core inflation sub-baskets, with the pressures being most significant in the Utilities (+76bps to 13.08% y/y), Transport (+48bps to 15.85% y/y) and Education (+53bps to 14.40% y/y) sub-baskets. Notably, the Utilities (+1bps to 1.38% m/m) and transport (+2bps to 1.51% m/m) prices are at their highest points since July 2016. Compared to a year ago, the core inflation increased by 26bps to 14.18% y/y.
On a balance of factors, we expect the headline inflation to settle at 1.65% m/m in April, with the corresponding base from the prior year translating to a 74bps increase in the y/y inflation rate to 17.56%.
