Ethiopia Inflation Rate Report for 2022/2023 Second Quarter

Inflation refers to the sustained increase in the general price level of goods and services in an economy over a period of time, leading to a decrease in the purchasing power of money. In simpler terms, it means that, on average, prices for goods and services are rising, and each unit of currency can buy fewer goods and services than before. The inflation rate is a percentage measure that represents the rate at which the general price level of goods and services in an economy increases over a specific period, usually a month, a quarter, or a year. It is used to quantify the extent of inflation and its impact on the purchasing power of money. Headline inflation refers to the overall inflation rate reported in the news and media, which reflects the total increase in the general price level of goods and services in an economy, including all components and sectors. It encompasses the price changes across a broad range of consumer goods and services, such as food, housing, transportation, energy, healthcare, education, and more.

Headline inflation decreased to 5 percent during the second quarter of 2022/23 from 10 percent a quarter earlier while it was higher than the 3.9 percent inflation recorded a year ago. The decline in quarterly headline inflation was attributed to 8.0 percentage point decrease in the prices of food & non- alcoholic beverages and 0.4 percentage point in non-food items. On annual terms, headline inflation rose by 1.1 percentage points owing to a 3.5 percentage point increase in non-food inflation. Food & non-alcoholic beverages and non-food inflation contributed 1.5 and 3.9 percent, respectively, to the headline inflation registered in the review quarter.

Source: ESS and NBE Staff Computation

Source: NBE Staff Computation

In the review quarter, food & non-alcoholic beverages inflation dropped to 2.7% from 10.7% a quarter earlier as a result of lower inflation in the prices of fish and seafood (45.7%), oils and fats (22.8%), bread and cereals (8.9%), meat (8.4%), non-alcoholic beverages (3.6%), milk, cheese and egg (7.2%), fruit (6.0%), sugar jam, honey, chocolate (5.6%), vegetables (3.8%) and other food products (2.1%).

Source: ESS and NBE Staff Computation

Non-food inflation saw a 8.5% slowdown in the review quarter from 8.9% a quarter earlier while it increased from 5.0% last year same quarter. The decline in quarterly non-food inflation was attributed mainly to lower inflation for recreation and culture (13.4%), miscellaneous goods (13.5%), alcoholic beverages and tobacco (10.3%), furnishing s, household equipment & routine maintenance of houses (10.2%), housing, water, electricity, gas and other fuel (8.7%)

Source: ESS and NBE Staff Computation