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The latest price data base released by Access Capital research team reveals double-digit year-on-year price increases for nearly a third of the 184 goods and services surveyed. The research team made public a list of 56 items, out of 184 items, it surveyed. However, the overall survey indicates a sustained slowdown in inflation rates for most commodities, while expectation indices for the coming quarter imply a reverse in prices on many commodities and services included in the survey.
“Inflation is likely to continue in double digits, albeit on the low side, for the early months of 2013. The outlook for the rest of 2013 points to a rapid reduction in inflation by mid-year as was the case last year. Considering the broad-based nature of deflation in recent months as well as base effects from last year, that is the elevated position of the price index this time last year, we now surmise inflation will drop to around 10 percent in the coming months and decline even further towards the single-digits of 7 to 8 percent, well before June 2013,” read a report from the team.
Most prominent among the items showing double-digit price increases are lease rates in some commercial neighborhoods. The team observed an unusually sharp jump in lease prices of land in many redeveloped sites especially the Lideta redevelopment zone. There is also a double-digit year-on-year price increase for construction machinery rentals like dozers and graders, residential property sale prices, as well as certain fruits and vegetables’.
Thirty percent of the items in the survey show year-on-year price declines. Notable year-on-year price declines were observed in certain widely used construction and building materials like local timber, angle iron and certain food items such as coffee, onions and local cooking oil.
On the basis of weights utilized for Addis Ababa’s official price index, the research team calculated a year-on-year inflation rate of 12 percent for the 184 items it covered in its city-wide survey. This inflation estimate is approximately equal to the 12.4 percent year-on-year inflation reported for Addis Ababa by the Central Statistical Agency (CSA) in January 2013.
Looking at food price trends alone, the survey shows a year-on-year food inflation of 14.7 percent in Addis Ababa. This is again very close to the 14.4 percent year-on-year food inflation reported by the CSA.
For the sixth time in a row, the research team survey included questions about price expectations in the coming quarter. The team asked retailers and businesses what price levels they anticipate in about three months time from now. The survey reveals an expectation of continued price rise for more than half of the 184 commodities surveyed. Business people anticipate a price rise for the 99 commodities and services included in the survey.
The team expects a quarterly inflation rate of 5 percent for all products. The expectation is kept high in part by a relatively high anticipated rise in food prices. The implied inflation from the price expectations survey translates to an annual inflation rate of about 20 percent.
These expectations appear to be exaggerated as compared to the government’s plan of reducing inflation to a single digit in the second half of the current budget year. The government continues promising to curtail inflation to a single digit since 2008, when it recorded a historic high, of 60 percent of inflation. Inflation had been skyrocketing at the beginning of the last budget year, reaching 40 percent.
In his address to the House of Peoples Representatives in late October 2012, Prime Minister Hailemariam Desalegn attributed the inflationary situation of the country’s economy to four variables; international commodity price hike, increased foreign reserve, monopolistic trade structures and the wide gap between demand and supply of agricultural and manufactured goods.
“These expectations appear to be exaggerated to us and seem to reflect the slow adjustment of public perceptions to what was a lengthy period of high inflation in the past couple of years,” claimed the team.