Dr. Adu Owusu Sarkodie, a lecturer at the University of Ghana’s Economics Department, has provided an explanation for why consumers are not seeing a decline in the cost of products and services even though the rate of inflation is trending downward.
He clarified that the current state of inflation is known in economics as “disinflation,” which occurs when the rate of inflation increases has decreased. It does not imply a decrease in prices.
When the nation enters the deflationary stage, he continued, consumers will start to notice a decrease in the cost of products and services.
When the inflation rate drops below zero, an economy is said to be in deflation, and prices generally decrease. When the inflation rate decreases but stays above zero, it is referred to as disinflation. Prices are rising during a disinflation, but more slowly.
The inflation rate decreased from 35.2% in October 2023 to 26.4% in November 2023, according to the Ghana Statistical Service (GSS).
Food inflation was the main cause of the decline, according to the GSS.
In November 2023, food inflation decreased by 12.6% to 32.2%. The rate of food inflation month over month was 0.8%.
Inflation outside of food also decreased, coming in at 21.7% as opposed to 27.7% in October 2023. The non-food inflation rate was 2.2% on a monthly basis.
Inflation rates in five divisions were greater than the national average.
These include food and non-alcoholic beverages (32.2%); restaurants and lodging services (27.1%); furnishings, household equipment, and routine household maintenance (32.2%); alcoholic beverages, tobacco, and narcotics (39.0%); and personal care, social protection, and other goods and services (35.4%).
When asked if this decline automatically indicates that consumers will pay less, Dr. Owusu Sarkodie said on Thursday, December 14 that “Far from that, you are talking about disinflation, when the inflation rate is being reduced, that is disinflation. I think what people are talking about is deflation. We haven’t gotten to the level of deflation where we expect prices to go down.
“But it is good news that we are experiencing disinflation because as we all know inflation is the reduction in purchasing power so when the reduction in the purchasing power has slowed it is good news. Let us liken inflation to the speed of a car, if you are driving 100km per hour and you reduce the speed to 60km per hour it does not mean that the car is reversed, it only means that the car is still moving forward but its speed has been reduced. So what we can understand is that the speed at which prices increased has reduced or has slowed down and I think it is better.”
Source: Marzuuq Issah | Ghana360news.com
