Author Archives: IJGResearch

Annual inflation declined to 7.0% in March, 0.8% lower than in February, while prices increased by 0.1% on a m/m basis. The decrease in annual inflation was largely as a result of a drop in food prices and a slight decrease in rental payments for dwellings. Neutralising some of the impact of falling food prices was an increase in the price of vehicles and the cost of operating transport equipment due to an increase in fuel prices. Overall, prices in three of the twelve basket categories increased at a faster annual rate than during the preceding month, eight at a slower rate and one grew at a steady pace. Prices for goods increased 6.3% y/y while prices for services grew 8.1% y/y, with slower growth in goods prices supported by a stronger Namibian dollar.

Housing and utilities remains the largest contributor to annual inflation due to its large weighting in the basket and the effect of irregularly high rental increases of 9.7% in January.  Annual inflation in this basket category declined to 9.6% in March as the rental payments subcategory was adjusted downward by 0.1% on a m/m basis. We continue to expect the housing and utilities basket category to underpin overall inflation.

Food and non-alcoholic beverages, the second largest basket item, was the second largest contributor to annual inflation despite a 0.6% decrease in prices on a monthly basis. Food and non-alcoholic beverage prices increased by 7.4% y/y, a significant slowdown compared to the 11.3% increase in February. The slowdown in annual food and non-alcoholic beverage inflation was partly due to base effects of a large monthly increase in March 2016 as well as the decrease in prices on a monthly basis in March 2017. The price cuts in maize and flower seen earlier this year mean that bread and cereal prices are now only 1.5% up from March 2016. While annual growth in coffee, tea, and cocoa prices has slowed slightly, this subcategory has still seen prices increase by 22.7% on a y/y basis, the quickest in the food basket. Fish prices are also still significantly up over last year at 16.7%.

Transport costs were one of the few basket categories to see an increase in annual inflation rate in March. As suggested earlier, this is largely due to an increase in fuel prices during the month and supported by increases in vehicle prices. Growth in the annual increase in vehicle prices has continued to slow at 6.9% in March versus 9.4% in February, while growth in the cost of operating personal transport equipment increased to 8.5% y/y versus 4.5% in February.

The Alcohol and tobacco category displayed increases of 4.4% y/y and 0.4% m/m in March versus 5.4% y/y and 0.3% m/m in February. The main driver in this basket category remains alcohol prices with tobacco prices relatively flat y/y.  The increases in sin taxes should put upwards pressure on alcohol and tobacco prices in April as the increased tariff is passed on to the consumer.

Namibian inflation is decreasing at a faster pace than we anticipated at the start of the year. A strengthening rand on a y/y basis has driven a decrease in goods inflation specifically. Oil process remain relatively stable at around US$55/barrel, and the end of the regional drought has brought some relief to consumers with some food prices actually declining. The recent downgrade of South Africa’s credit rating however, has seen the rand depreciate from R12.3/US$ to R13.50/US$ with further weakness a likelihood. This will flow through to inflation and could cause South African inflation to remain above the 3% to 6% target range for longer than expected. Due to currency effects we expect annual inflation to remain elevated over the short term although possibly dipping below 7% in April.