Inflation Hits Three-Month High

Ethiopia’s inflation jumped up to a three-month high in September 2016, stretching further the resources of households. The rate, which had been on the decline since January – a month that had the last double digit count – saw an increasing trend for the first time in eight months, last month.

Inflation has reached 6.9pc this September, indicating an increase of close to 7pc compared to the cost of living a year ago.

House rent, construction materials and fuel prices have been rising at the fastest rate, hitting 13.6pc in the month from September, reflecting the increasing price trend for those items.

“The rent price of houses is increasing at an astonishing rate, particularly with regards to condominiums,” said Solomon Yonas, a broker working in the informal sector.

In a bit to solve the housing problems, the city government introduced condominium housing programmes eleven years ago. Since then, it has transferred 175,000 low-cost condominiums to its residents to date. Currently, there are close to a million people who have requested a condominium house from the city government.

“The population growth and the number of available houses are unbalanced,” Solomon added.

The upward trend for the price of construction materials was also another factor for the rising cost of living last month.

“There was a high increase in the price of imported construction materials, though it was moderate with regards to locally produced construction materials,” said Gebrehiwot Girma, General Manager of Genale Construction, a grade one contractor.

“The deficiency of foreign currency contributed a lot to the rise,” he added.

The year-on-year food inflation rate widened in September, increasing to 6.1pc from August’s 4.4pc. The main driver of the rising prices is the soaring price of milk and milk products which surged by 11.2pc in September 2016 compared to a similar period last year.

Another item that has exhibited a high increase is cereals. A kilo of cereal, which cost around 100 Br a year ago, can now cost over 110 Br on average. Conversely, the Addis Abeba Trade Bureau says that the price of cereals has been stabilised through regulation and supply from the city’s cooperatives in order to balance with the demand.

Last year, in September, meat traded at an average of 125 Br a kg. However, this year it escalated to 138 Br, while fruits increased by 8.6pc during the past month.

September 2016 saw the price of non-alcoholic beverages rise by 11pc in comparison to the same period last year. Despite these noticeable increments, the prices of vegetables and spices recorded declines. With a 20.6pc dip, spices marks the largest slump among food items. This is followed by the 13.9pc drop in the price of vegetables this September compared to the previous year.

On the other hand, the inflation rate for the non-food items rose by 7.8pc during the preceding month. The figure is a bit high compared to the 7.6pc rise recorded in the year to August. The increase in non-food prices is largely down to house rent, construction materials, water, fuel and power.

The breakdown of the Non-Food Price Index indicates that clothing and footwear surged by 3.1pc; furniture, furnishings, household equipment and operations by 6.7pc; health by 7.8pc; transport by 1.3pc; recreation and culture by 10.5 pc; education by 0.2pc, and restaurants and hotels by 11.2 pc. While alcoholic beverages, tobacco and communication fell by 1.8 percent and 2 percent, respectively.

The report also indicated that the country’s overall inflation rate, measured by the twelve month moving average, increased by 8.3pc in September 2016 relative to the same period last year. The figure is the lowest of the past 13 months. Similarly, the twelve moving average for food items and non-food components surged by 8.6pc and 8pc, respectively. This indicates that the inflationary pressure of the country has an extended presence, the report underscored.

Meanwhile, the month‐on‐month inflation rate – a price change between the two latest months – for September 2016, has shown a rise of 2pc. The prices of all goods and service has shown a 2pc increase during the past month compared to August 2016.

The IMF had foreseen that the CPI would remain at around 8pc over the coming months, owing to the price stability approach used by the government. This was before it projected the overall economy would grow at a rate of 7.5pc, two weeks ago.


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