Headline inflation increased significantly from 2.4 percent in February to 3.2 percent in March 2021, reverting to within the Bank’s medium-term objective range of 3 – 6 percent, and higher than the 2.2 percent in March 2020.
The increase in inflation between February and March 2021 mainly reflects the upward adjustment in domestic fuel prices in March 2021, as reflected in Transport inflation which increased from -1.4 in February 2021 to 1.4 percent in March 2021.
The rise in inflation also reflects the increase in the annual price changes for some categories of goods and services in the same period: Alcoholic Beverages and Tobacco (from 6.5 to 7.1 percent); Food & Non-Alcoholic Beverages (3.7 to 4 percent); Restaurants and Hotels (from 1.5 to 1.7 percent); Miscellaneous Goods and Services (from 1.2 to 1.4 percent); Furnishing, Household Equipment and Routine Maintenance (from 1.9 to 2 percent); and Health (2.2 to 2.3 percent).
However, the upward pressure on inflation was partly offset by inflation remaining stable with respect to: Clothing and Footwear (2.8 percent); Housing, Water, Electricity, Gas and Other Fuels (7.2 percent); Communication (0.8 percent); Recreation and Culture (1.7 percent) and Education (1.7 percent).
Consumer prices have been on the rise since the year began, and might following a three-year decline in the inflation rate, which averaged1.89 percent last year, down from 2019’s average of 2.79 percent, 2018’s 2.2 percent and 3.3 percent in 2017.
While overall prices might have risen by only 1.89 percent in 2020, the numbers do not truly reflect the reality of rising prices amid a pandemic, where costs have increased for basic needs and commonly used services faster than what the inflation rate reflects. The country’s consumer price index (CPI), is made up of twelve group indices, intended to represent average consumer patterns.
In the past year, the second largest component of the index, Housing, water, electricity, gas, and other fuels recorded a 6.9 percent increase in prices; the Alcohol beverages and tobacco prices grew by 6.5 percent; Education costs were up 4.7 percent; Food and non-alcoholic beverages rose by 3.6 percent while the Clothing and footwear index prices were up by 2.8 percent.
While other group indices registered increases in prices, the fall in consumer prices in 2020 has largely been down to changes in administered prices. The government reduced fuel costs twice between April and June. The transport sector is the largest component of the CPI and as such, any price movements within the transport index usually dictates the movement of the country’s inflation rate.
With the planned increase of value added tax (VAT) and other service charges expected in April, economists say costs will rise for businesses and this will be reflected through increased prices to households.