Inflation hits one-year high in February

Annual headline inflation rose to 6.7% for the year ended February 2017, up from 5.9% in January, on the back of higher food prices, according to figures released by the Uganda Bureau of Statistics on Tuesday.

It is the biggest increase since February 2016, when annual headline inflation rose to 7.0%.

Annual food crops inflation increased to 18.8% from 14.5% in January, driven by a rise in vegetables inflation to 13.3% versus 6.5% in the year ended January 2017. Fruits inflation, however, fell to 28.5% in February from 30.1% in January.

Core inflation, which is targeted by the central bank, inched up to 5.7% from 5.3% the previous month. This was mainly due to a rise in other goods inflation to 5.6% from 4.9% in January. Additionally, services inflation climbed slightly to 5.9% versus the 5.8% recorded during the year ended January 2017.

The central bank predicted a temporary increase of inflation “within the target band of 5 percent plus/minus 3 percentage points” caused by higher food and international oil prices in February’s Monetary Policy Statement. However, it said inflation would fall to 5% – the monetary policy target – in 12 months.

The bank downgraded its GDP growth projection for 2016/17 to 4.5% from 5.0%, mainly due to drought conditions in several parts of the country – which are also responsible for rising food prices.

Energy, fuels and utilities (EFU) prices in the year ended February 2017 declined to 1.0% compared to the 1.4% reported in January. The decline was on account of a fall in solid fuels inflation to -2.1% from 2.4% a month earlier. The rise in charcoal prices slowed to -2.2% in February from the 2.8% recorded in the year ended January.

The consumer price index, which measures the weighted average of prices of a basket of consumer goods and services, and whose rate of change determines annual headline inflation, rose to 166.15 in February versus 164.76 in January.

The Fort Portal geographical area registered the highest annual inflation of 8.9% versus 6.6% in January, with a 19.3% rise in annual inflation for food and non-alcoholic beverages contributing the most to the increase. Kampala Low Income registered the second highest inflation of 8.4% versus 6.5% (revised) in January, while Arua had the third highest rate of 8.3% versus 7.9% the previous month.

Monthly headline inflation rose 0.8% versus 0.0% in January. Monthly core inflation rose to 0.5% from the -0.1% recorded the previous month. Food crop prices also increased to 3.4% in the month from -1.6% in January. Monthly energy, fuel, and utilities came in at 0.2% versus 3.2% the previous month.