Inflation Rate to Drop in June, CardinalStone Forecasts
Nigeria’s multi decade highs hot red inflation is expected to start dropping from the month of June, according to CardinalStone macroeconomic commentary note.
The multi-asset investment banking firm analysts are projecting a slide in consumer price index to 33.8% for June reading. In Nigeria, inflation has turned ugly for economic entities with few winner(s).
Nigerian government recently recorded a steep surge in value added tax collection as price levels worsened across the economy. On the other hands, manufacturers are scaling back output due to customers’ adjusted scale of preference.
After breaching all resistance, inflation accelerated to 33.95% in May, data from the National Bureau of Statistics (NBS) showed.
“The May inflation reading was at par with our projection and lower than Bloomberg’s average consensus estimate of 34.5%”, CardinalStone said in its commentary note. The firm had stated that Nigeria’s inflation is close to its peak, as upside risk continues to wane and base effect-induced moderation appears to be in the offing.
“True to our prognosis, the month on month inflation reading moderated for the third consecutive month, lowered by 15 basis points”, the investment firm said.
Food inflation, down by 23bps to 2.3%, continued its descent month on month as the off-season harvest, which is usually consummated between April and June, supported supplies and lower prices, the firm said.
CardinalStone stated that this harvest could have masked some reported cases of lower-than-average rainfall in food-producing regions.
“Further providing accretive benefit to food prices might be the relative stability in energy inflation, as the Dangote refinery effect is positive on AGO prices, with some gains to haulage costs and AGO-powered farm machinery:, the firm added.
Based on NBS numbers, analysts started that food inflation increased modestly by 11bps in 12 months, which they considered as the slowest pace of uptick in 16 months.
“Akin to the food inflation basket, core inflation tapered by 17bps to 2.0% month on month, reflecting gains from possible lower AGO prices.”
The firm noted that the biggest item in the core basket, declined by 28bps in May when compared with figure from the previous month. Other notable decreases were seen in furnishing & Household Equipment Maintenance, and Recreation & Culture. On a YoY basis, core inflation increased by 22bps to 27.1%.
“We maintain the view that inflation may have reached its peak, especially if month on month consumer prices continue to moderate at the current pace.
“This outlook is midwived by the high base effect, which is expected to be more pronounced in the second half of the year. Our projection for June inflation is 33.8% year on year, a slight decrease from the 34.0% reported in May 2024”, CardinalStone said.
Analysts said they expect a positive pass-through to transport inflation, which dovetailed neatly with food prices as Dangote refinery increases the supply of AGO,
“However, upside risks are still prevalent, stemming from the negative impact of an extended period of below-average rainfall, more pronounced insecurity-related issues, and a likely increase in minimum wage”.
Analysts said the moderation in month on month inflation, coupled with the recent slight decline of stop rates at the Nigerian Treasury Bills (NTB) auctions, are suggestive that the market might be nearing the rate hike cycle in Nigeria. #Inflation Rate to Drop in June, CardinalStone Forecasts
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