Inflation Rears its Menacing Head

The prices consumers pay for widely used goods and services rose by 19.3pc in October, marking one of the fastest paces, according to a report from the Central Statistical Agency (CSA). The year-on-year inflation rate has also shown a 0.6-percentage-point rise compared to the preceding month.

Gauged by the Consumer Price Index (CPI), headline inflation indicates the cost of living by measuring the average change in prices that consumers pay for a basket of goods and services. The survey shows that food inflation accelerated to 23.2pc, a rise of two percentage points. In contrast, non-food inflation came in at 14.4pc, a bit slower pace than the rate registered in September.

Most cereal prices continued to rise during the current month, which mainly tends to drive up food inflation, according to the Agency report.

"Besides the hike in the price of bread, injera, sugar, imported edible oil, potatoes, whole pepper and coffee during the current month has contributed to an increase in the rate of inflation," reads the report.

Maize, wheat, vegetables and some pulses registered a decrease in their price in October, according to the report.

The rise in non-food inflation is mainly due to a spike in the prices of alcohol and tobacco, khat, housing repair and maintenance, energy, medical care, and gold. Transportation costs have declined in the past month.

The month-on-month general CPI, which measured the price change between the two latest months, has shown an increase of 0.4pc compared to the preceding month.

Getachew Asfaw, an economist who has published four books on the macroeconomic conditions of the country, attributes the chronic inflation growth to a supply shortage and higher money circulation in the economy.

"Due to the higher inflation rate, the real income of citizens is declining," he said, "leading them to cut consumption."

Getachew also says that there are many people in the country with windfall income, where their income is highly dependent on seasonal businesses and activities.