Uganda’s headline inflation drops from 6.4% to 5.7%

August 1, 2017 in Business, Markets by Editor

August 1—Lower food prices in recent weeks have helped slow the Annual Headline Inflation from the 6.4% recorded in June to the 5.7% at the end of July. This represents a 0.7% point drop from the previous month.

The Annual Core Inflation, which the Bank of Uganda uses as a reference point for setting the Central Bank Rate, declined to 4.5  percent for the year ending  July 2017 compared to the 4.9 percent recorded for the year ended June 2017.

Ben Paul Mungyereza the Executive Director at Uganda Bureau of Statistics (UBOS) said in his latest report, this is a good indicator for this financial year, because food prices are expected to drop even further as weather conditions stabilize. “The drop in inflation is good and we even hope to see better numbers for this financial year. We are starting on a good note,” he said.

This drop is attributed to a decrease in the Food Crops Inflation which fell to 12.9% from 18.1% for the year ended June 2017. The drivers for the lower inflation were vegetables and fruits. Also there has been an increased supply of foods due to somewhat stabilized weather conditions compared to last year at same interlude.

The Annual Inflation for Health also dropped to 1.2% for the year ending July 2017 compared to 1.4% registered for the year ended June 2017. Hospital Services inflation reduced to 2.9 from to 4.0% registered in June 2017. However, Outpatient Services inflation increased to 1.4% from 1.2 in June. This drop is attributed to government removing taxes on hospital equipment in this year’s budget.

However there was an increase in Services Inflation, from 3.9% in June 2017 to 4.0% for the year ending July 2017 compared to 3.9 percent recorded for the year ended June 2017.

The Annual Energy, Fuels and Utilities (EFU) Inflation increased to 7.8% for the year ending July 2017 compared to the 5.7% during June 2017. The drivers for the increase were solid fuels (charcoal and firewood) that recorded an increase to 6.7% compared to 2.7% recorded in June 2017. In particular, diesel inflation declined to 14.8% t for the year ending July 2017 compared to 21.9 percent recorded in June.

Housing, Water, Electricity, Gas and other Fuels Housing, Water, Electricity, Gas and other Fuels increased to 5% from 3.6% recorded for June. The increase was attributed to Inflation of Electricity, Gas and Other Fuels.

According to the report, the districts of Fort Portal, Gulu and Arua registered the highest inflation mainly due to higher prices for foodstuffs and soft drinks.

Fort Portal registered the highest annual inflation of 9.9 percent for the year ending July 2017 compared to the 9.6% recorded for the year ended June 2017. Gulu is second with a rise to 9% July compared to 8% in June. Arua registered the third highest at 7.7 percent for the year ending July 2017 but lower than 9.1 percent recorded for the year ended June 2017.