Consumer inflation rises for second month in row

Uganda’s annual headline inflation rate, which measures the year on year change in the prices of goods and services bought by households, increased for the second consecutive month in July, mainly as a result of new taxes on social media and mobile money and higher car prices.

The headline inflation rate increased by 3.1% from a year earlier, the highest increase since December 2017. Last month’s annual inflation rate was 2.1% (revised). “The increase is largely attributed to the annual core inflation that rose to 2.5% for July compared to 0.8% (revised) registered in June,” the Uganda Bureau of Statistics said on Tuesday.

Services inflation increased by 4.1% from the same month last year compared to 1.7% in June, exerting the largest upward effect on annual core inflation, according to the bureau. This increase followed a rise in communication inflation to 5.4% compared to a decline of 14.4% year on year in June 2018. Additionally, transport inflation also rose to 12.1% from 8% in June.

Telephone and telefax services had the biggest inflationary effect on communications, with their prices increasing by 7.5% between July 2017 and July 2018 compared to a drop of 18% the previous month. This is a direct result of new taxes on accessing social media and using mobile money services, which went into effect on 1 July.

Related: Inflation to rise on higher import prices and increased taxes, Bank of Uganda says

The decision by Parliament to ban cars older than 15 years starting September 2018 has also had an upward effect on vehicle prices, leading to a rise in transport inflation. Purchase of vehicles inflation rose to 25.3% year on year in July from 13.8% last month, Ubos said. Ever since the ban was passed, car dealers have increased the prices of cars older than 15 years because they’re apparently preferred by buyers.

The 12-month energy, fuel and utilities inflation increased to 16% in July compared to 15.1% in June 2018. Under this group, the largest contribution came from prices of liquid energy fuels, which rose by 11.5% between July 2017 and July 2018, up from 8.9% in June.

In particular, petrol inflation increased to 15% for the year ending July 2018 compared to the 11.6% recorded the previous month, while diesel inflation rose by 21.4% year on year compared to 16.2% in June.

However, annual food crops and related items inflation fell by 2.0% versus the 2.3% rise recorded in June, due to a decline in the 12-month fruits inflation of 3.4% compared to a 1.2% increase in June. Vegetable inflation was also negative in July.

An increase was also recorded for the one-month inflation rate, which came in at 0.4% from a fall of 0.2% in June. This was mainly due to a 1.4% increase in monthly core inflation for July, up from 0.1% the previous month.

Communication inflation and transport were the biggest contributors to the increase in monthly core inflation, rising 20.3% from 0.0% the previous month and 3.1% versus a fall of 0.3% in June, respectively.

“However, monthly food crops and related items inflation registered a 7.1% drop during the month of July 2018 from the earlier drop of 5.1%,” said Ubos.

Related: Inflation inches up in June