SUPPLY SIDE CHALLENGES DRIVE JUNE CPI TO 9.2%

The latest Consumer Price Index (CPI) indicates a 20 basis points growth over May’s 9.0%. The June 2015 CPI rose to 9.2% year-on-year (YoY) to establish a consecutive 7-month uptrend. Closer analysis shows that the faster pace of June’s CPI was mostly influenced by supply side challenges recorded across major divisions such as food items, non-alcoholic beverages, fuels and lubricants. The Food sub-index category which constitutes a greater weight in the CPI rose to 10.0%; 20 basis points higher than 9.8% recorded in May. This is the tenth month upward growth in this category. Cursory analysis revealed that this category was amplified by late onset of rains which pushed back the harvest season. It was equally impacted by limited Premium Motor Spirit (PMS) which impacted negatively on transportation cost. This created price upsurges in staple food items such as Vegetables, Fish, Potatoes, Cereals, Tubers and Meats groups. The Core sub-index category (i.e., All Items less Farm Produce) also shored up but with a lesser pace. It rose to 8.4% year-on-year, representing 10 basis points growth over May’s record of 8.3%. This is the sixth consecutive month uptrend in this category. The upsurge here was boosted by price increases recorded in items such as Fuels and Lubricants, Transportation, Education and Miscellaneous Goods & Services. A further analysis on impact on locations shows that both Urban and Rural dwellers’ indices grew faster than prior figures. The Urban index rose to 9.2%, showing addition of 10 basis points to 9.1% recorded in May. The Rural index grew faster by 20 basis points to 9.1% up from 8.9% in May. The growth in the two indicators were intensified by all the causative cost items mentioned above.