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Inflationary pressures weaker than expected in February

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SAT, MARCH 16 2019-theG&BJournal-In February inflationary pressure eased 0.06 percent to 11.31 percent year-on-year, significantly lower than the 11.37 percent rate recorded in January 2019 according to data published Friday by the National Bureau of Statistics (NBS). The subdued inflation data was largely the product of slower core and food inflation movements.

Food prices contracted to 13.47 percent in February 2019 compared to 13.51 percent in January 2019, accounted for by base effects.

The easing of inflationary pressures also in part reflects the feed through effects of subdued election spending, lower energy prices and favourable weather conditions outlook which is expected to help grain outputs positively.

According to analysts at Cordros Capital, moderation  in  food  inflation  was  supported  by  all  its components, with processed food (-16 bps) leading the pack, followed closely by imported foods (-5 bps), and  farm  produce  (-3  bps).

“Looking ahead, we remain largely sanguine on moderation in headline inflation over the month of March, as there are no strong cases for a negative surprise for both the core and food baskets,’’ they said.

The percentage change in the average composite CPI for the twelve months period ending February 2019 over the average of the CPI for the previous twelve months period was 11.56 percent, showing 0.24 percent point from 11.80 percent recorded in January 2019.

The urban inflation rate increased by 11.59 percent (year-on-year) in February 2019 from 11.66 percent recorded in January 2019, while the rural inflation rate increased by 11.05 percent in February 2019 from 11.11 percent in January 2019.

Over all view is that inflation will continue to weaken year-on-year in March owning to stable food and energy prices. The strengthening of the economy as reflected in recent GDP numbers will also continue to weigh on inflation. Recent data by the NBS shows that the economy expanded 2.4 percent annually in Q42018, well above the 1.8% growth recorded in Q32018.

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