Core inflation rises at fastest pace in two years

Core consumer prices in Uganda rose by their quickest pace in two years in June, buoyed by higher service prices, according to data released on Friday.

Core inflation, which strips out volatile food and energy prices and is closely watched by the Bank of Uganda, rose 4.9% from a year earlier in June, up from 4.6% in May. That was the fastest annual pace of core inflation since June 2017 when it came in at 5.0%.

The rise in core prices was responsible for the slight increase in the annual headline inflation rate to 3.4%, up from 3.3% in May, according to data from the Uganda Bureau of Statistics.

“The driver for the increase in annual core inflation was annual services inflation that rose to 4.7% for the year ending June 2019 compared to the 4.0% recorded for the year ended May 2019,” Ubos said.

“In particular, annual inflation for education increased to 6.8% for the year ending June 2019 compared to the 3.6% recorded in May 2019. In addition, annual other goods inflation rose to 5.1% for the year ending June 2019 compared to 4.9% recorded in May 2019.”

The increase in education inflation was due to pre-primary and primary education inflation which rose 6.7% year on year in June compared to the 3% recorded the previous month. Secondary education inflation also increased by 7.4% in the year to June up from 3.8% in May.

Food crops and related items inflation fell 3.7% in the year to June compared to a decline of 5.4% in May. This was mainly a result of an increase in fruits inflation. In addition, vegetable prices also increased compared to the same month last year.

The annual energy, fuels and utilities inflation rate fell 0.5% in June, down from 4.6% in May. The decline was largely due to the downward contribution that came from solid fuels, particularly firewood.

Core inflation is expected to remain close to the 5% target in the coming months. However, the Bank of Uganda expects price growth in the next two to three years to “edge up slightly, peaking at 6.4% in the third quarter of 2021.”

Monthly inflation

Monthly inflation dropped 0.1% in June, down from the 0.4% rise recorded in May. “The drop in the monthly headline inflation was attributed to the monthly food crops and related items inflation that decreased by 3.5% for the month of June 2019 from the earlier 2.6% rise recorded in May 2019,” Ubos said.

Core inflation increased by 0.5% in June versus 0.1% in May. This was largely a result of an increase in monthly services inflation.

Energy, fuel and utilities prices declined by 0.7% compared to the 0.2% rise that was recorded in May, largely due to a fall in firewood prices.


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