Weekly inflation held near a quarter of a per cent, enough to push the annual rate to 8.8 per cent.

By Kanisa Magazine · June 2022

Congo’s consumer prices were rising at 8.8 per cent a year by the last week of June 2022, according to the Banque Centrale du Congo’s national retail index, up from 5.4 per cent at the end of December. The weekly pulse was steady, at about a quarter of one per cent, but a steady quarter of a per cent compounds, and fuel was the price that set the pace.

The BCC’s digest of 29 June gives three readings of the same pressure. The nationwide index rose from 134.98 to 136.00 over the four weeks to 26 June, and the annual rate stood at 8.79 per cent. The measure the central bank uses to judge its policy rate, based on the national statistics institute’s method, showed 8.48 per cent on 22 June, against 5.38 per cent on 29 December. Inflation had moved up three points in half a year.

A quarter of a per cent every week

The June weekly readings were low and regular, and that regularity is the problem.

The BCC’s national weekly rates for June were 0.27, 0.26, 0.24 and 0.25 per cent. Cumulated since the start of the year, prices had risen 4.14 per cent by 26 June, which the bank annualises at 6.2 per cent. That number sits below the 8.8 per cent year-on-year rate because the second half of 2021 added pressure that is still in the base. Households live with the year-on-year figure, since it compares today’s basket with the one they paid for last June.

The food group, 141.04 to 142.21 over four weeks, rose 0.8 per cent. Meat climbed from 140.62 to 142.12, and sweets and preserves from 160.45 to 166.08, a 3.5 per cent jump that shows how imported items are repricing.

Fuel as the price-setter

Pump prices moved first, and the rest of the basket followed with a lag.

In January a new price structure set petrol at CDF 2,495 in the south and 2,450 in the east, while the west zone, which includes Kinshasa, stood at 2,095 on 26 January in the Ministry of Economy’s schedule reproduced in the BCC digest. By 16 April it was 2,195, and by 30 May 2,345, a rise of 12 per cent in four months. The weekly price series compiled by the research institute IRES for Kinshasa’s markets recorded a jump to 0.41 per cent in the third week of April, in the week of that fuel adjustment, against typical readings of 0.05 to 0.10 per cent.

The channel is mechanical. Kinshasa imports most of what it eats and moves it by truck. A higher diesel price enters transport rates, then wholesale margins, then the shelf. Radio Okapi relayed on 30 March traders at Gambela market reporting that a sack of cassava chips had gone from CDF 70,000 to 120,000, a sign of how quickly transport and supply costs can reach staples.

The real rate has turned negative

With policy at 7.5 per cent and inflation at 8.5 per cent, the central bank is behind the curve.

The BCC’s policy rate has stood at 7.5 per cent since January. Against the 8.48 per cent annual reading, the real policy rate on the BCC’s own table was minus 0.78 per cent on 22 June. In the previous months it had been positive: plus 2.4 per cent in January, plus 1.6 per cent at the end of March, and slightly negative by the end of May. A negative real rate does not cause inflation in a dollarised economy, where the franc exchange rate has held at about CDF 2,005 all year. It does say the central bank is no longer the brake.

The IMF’s June decision, announced on 29 June, raised its 2022 inflation projection to 11 per cent at year-end, citing imported prices, well above the central bank’s own estimate for the year in the same digest.

What a household-facing business does now

Plan for imported inflation that arrives through diesel, and index contracts accordingly.

For retailers and distributors, the lesson is to track the pump price schedule as a leading indicator, since the next adjustment feeds through within weeks. For manufacturers, pricing reviews every quarter, not every year, will protect margins when the annual rate is near 9 per cent. For employers, a wage round pegged to the 8.8 per cent year-on-year figure is a defensible floor.

The July digest will show whether the weekly rate eases below a quarter of one per cent. If it does not, the annual figure will cross 9 per cent before the end of the third quarter.