Inflation drops to 40.1% in August, driven by food

In a surprising turn of events, the headline inflation rate has dipped from 43.1 percent in July 2023 to 40.1 percent in August – defying market expectations.

The Ghana Statistical Service’s (GSS) latest data indicate that the decline can largely be attributed to a decrease in food inflation – a significant factor contributing to the country’s persistent inflationary pressures.

Over the past three months, elevated food costs have emerged as a major driver of inflation; posing challenges for both consumers and policymakers alike. However, there is hope on the horizon as experts predict a potential respite in the near-future; thanks to the ongoing major staple crop harvest season.

While the drop in headline inflation is a positive sign, concerns linger over the continuous surge in food prices that has persisted since May 2023. In August 2023 food inflation stood at 51.9 percent, a slight improvement compared to the previous month’s 55 percent. Month-on-month food inflation showed a decrease of 0.3 percent, offering a glimmer of hope.

On the non-food front, inflation decreased as well with non-food inflation at 30.9 percent in August, down from 33.8 percent in July. The month-on-month non-food inflation also experienced a decrease of -0.2 percent.

Breaking down the inflation figures further, locally produced items saw an inflation rate of 42.4 percent while imported items had a lower inflation rate of 36.2 percent.

The surge in inflation since May 2023 can be attributed to a combination of factors, including the impact of new revenue interventions, upward adjustments in utility tariffs and the persistent rise of food prices. While initial effects of the revenue measures may be diminishing, the continuous surge in food prices remains a key driver of inflation – partially offsetting the favourable base effect observed since May 2023.

The consistent rise in inflation over the past three months can be largely attributed to the escalating costs of food items, with a particular focus on cereal products and meat.

In the first half of 2023, inflation showed signs of easing, dropping from a peak of 54.1 percent in December 2022 to 41.2 percent in April 2023. However, inflation increased by 100 basis points in May; thus reversing the downward trend. The GSS had noted a gradual slowdown in the rate of price increases earlier this year, with a significant decrease of inflation from 52.8 percent for February to 45 percent in March.

The unexpected drop in headline inflation for August 2023 is likely to bring some relief to consumers, who have been grappling with the high cost of living. However, economists and policymakers will remain vigilant- closely monitoring the food market as the country enters the crucial harvesting season in coming months.

“While core inflation also increased, businesses’ inflation expectations remained flat at an elevated level. If not contained, this could embed underlying inflationary pressures. Thus, it’s crucial for policy to respond appropriately and decisively to prevent these risks from becoming embedded and derailing the disinflation process,” Bank of Ghana (BoG) Governor, Dr. Ernest Addison, asserted during a media briefing on the Monetary Policy Committee’s position.

In the Committee’s assessment, risks to the inflation profile are judged to be elevated; driven by second-round effects of food prices. Inflation persisted at around 42 percent in the second quarter of 2023, despite the elimination of central bank financing in the year’s first six months.

“Ghana’s macroeconomic framework requires decisive tightening, from both the fiscal and monetary sides, to firmly anchor inflation expectations on a declining path,” he stated at the time.



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In a surprising turn of events, the headline inflation rate has dipped from 43.1 percent in July 2023 to 40.1 percent in August – defying market expectations