The National Bureau of Statistics (NBS) reported the headline inflation rate for July 2023 to have increased by 129bps to 24.08% YoY (from 22.79% YoY in June 2023). While we anticipated an uptrend, the inflation outcome is 43.00bps above our forecast of 23.65%. We note that the July data also reflects the effect of the petroleum subsidy removal in May and the resultant increase in prices of human and merchandise transportation in the subsequent months. Unsurprisingly, both the food and core indexes ticked up. The food index increased by 26.98% YoY (vs 25.25% YoY in June 2023), driven by higher prices in food items like oil and fat, bread and cereals, fish, potatoes, yam and other tubers, fruits, meat, vegetables, milk, cheese, and eggs. The core index also increased by 41bps (20.47% YoY vs. 20.06% YoY in June 2023). We note that the NBS reconstituted the core index to exclude energy for the first time due to the price volatility of energy products prompted by the removal of fuel subsidy and FX devaluation. Key drivers of the core index included prices of passenger transport by air, passenger transport by road, vehicle
spare parts, medical services, and maintenance and repair of personal transport equipment. On a month-on-month basis, headline inflation surged by 2.89%. Also, both the food and core indexes were up by 3.45% and 2.11% (vs. 2.40% and 1.77% in June 2023), respectively.
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