NCPI – February 2020

The Namibian annual inflation rate ticked up slightly to 2.5% y/y in February, following the 2.1% y/y increase in prices recorded in January. Prices in the overall NCPI basket increased by 0.3% m/m. Overall, prices in eight of the twelve basket categories rose at a faster annual rate than in January, while four categories rose at a slower annual rate. Prices for goods increased by 3.5% y/y and 1.1% y/y.

Transport, the third largest basket item by weighting, was once again the largest contributor to annual inflation, accounting for 0.6 percentage points of the total 2.5% annual inflation rate. The basket category recorded price increases of 0.2% m/m and 4.4% y/y. The purchase of vehicles subcategory saw price increases of 3.8% y/y, while the operation of personal transport equipment subcategory recorded price increases of 5.9% y/y.

The price of Brent crude has plummeted this week after Saudi Arabia and Russia triggered an oil production war, combined with fears of the global economic impact of the fast-spreading coronavirus. The price of Brent crude fell 28.0% to US$33.0 per barrel this week as both the Saudis and Russians have committed to flood the market with record amounts of oil, we expect the oil price to remain low for the next few months. We thus expect the Ministry of Mines and Energy to cut fuel prices over the next few months, which will lead to lower transport inflation in the coming months.

Food & non-alcoholic beverages prices increased by 1.0% m/m and 2.8% y/y in February, ticking op from inflation of 2.2% y/y recorded in January. Despite this relatively subdued rate of inflation, this basket category made up the second largest portion of annual inflation. Prices in all thirteen of the sub-categories recorded increases on an annual basis. The largest increases were observed in the prices of fruits which increased by 15.0% y/y and fish which increased by 8.2% y/y. We expect muted inflation in this category after most parts of the country received good rainfall during February which is likely to have a positive impact on local food production.

Alcoholic beverages and tobacco prices, was the third largest contributor to the annual inflation rate in February, with prices in the basket increasing by 0.4% m/m and 2.7% y/y. Tobacco prices recorded an increase of 0.4% m/m, but a decrease of 4.4% y/y, while prices for alcoholic beverages recorded an increase of 0.4% m/m and 4.4% y/y.

The zonal data shows that on a monthly basis, prices declined by 0.1% in the northern zone 1 while rising elsewhere in the country. On an annual basis the Windhoek and surrounding area, in zone 2, recorded the lowest inflation rate at 2.1% y/y in July, with the northern region recording the highest rate of annual inflation at 2.8% y/y. Inflation in zone 3 (Eastern, Southern and Western Regions) remained unchanged at 2.5% y/y.

While the Namibian annual inflation print for February at 2.5% has ticked up from the 2.1% figure recorded in January, inflation remains at historically low levels. With low inflationary pressure due to adequate rainfall in most parts of the country, an oil-price war and a lack of domestic demand, we expect inflation to remain subdued in the coming months. IJG’s inflation model forecasts an average inflation rate of 2.8% y/y in 2020. This lower expected inflation and low economic growth forecasts means that there is still some leeway for both the South African Reserve Bank and the Bank of Namibia to cut repo rates at their next MPC meetings.

New Vehicle Sales – February 2020

799 New vehicles were sold in February, an increase of 19.1% m/m from the 671 vehicles sold in January, and a 6.4% y/y increase from the 751 new vehicles sold in February 2019. Two months into 2020 and 1470 new vehicles have been sold, of which 638 were passenger vehicles, 721 light commercial vehicles, and 111 medium and heavy commercial vehicles. The first two months of 2019 saw 1,429 new vehicles sold. On a twelve-month cumulative basis, a total of 10,442 new vehicles were sold as at February 2020, representing a contraction of 8.9% from the 11,459 sold over the comparable period a year ago.

A total of 347 new passenger vehicles were sold during February, increasing by 19.2% from the 291 passenger vehicles sold in January. On a year-on-year basis however, February new passenger vehicle sales were 2.0% lower than the 354 vehicles sold a year ago. Year-to-date, passenger vehicle sales rose to 638, reflecting lower annual sales than the preceding 9 years, and an 8.3% decline from February 2019. On a rolling 12-month basis, passenger vehicle sales are at their lowest level since January 2011, highlighting the severity of the slowdown in sales.

A total of 452 new commercial vehicles were sold in February, representing an increase of 18.9% m/m and 13.9% y/y. 386 Light commercial vehicles, 21 medium commercial vehicles, and 45 heavy and extra heavy commercial vehicles were sold during the month. Light commercial vehicle sales rose 10.0% y/y, medium commercial vehicle sales rose 50.0% y/y and heavy commercial vehicle sales increased by 40.6% y/y. On a twelve-month cumulative basis, light commercial vehicle sales have declined by 12.4% y/y, medium commercial vehicles rose by 14.2% y/y, and heavy commercial vehicles rose 17.1% y/y. While the positive 12-month growth in medium- and heavy commercial vehicle sales is positive news, the growth is from a very low base.

During February, Toyota overtook Volkswagen in terms of year-to-date market share of new passenger vehicles sold. Toyota claimed 29.6% of the market, followed closely by Volkswagen with 28.8% of the market. They were followed by Kia and Hyundai with 7.8% and 6.4% of the market respectively, while the rest of the passenger vehicle market was shared by several other competitors.

On a year-to-date basis Toyota remained the leader in the light commercial vehicle space with a 57.0% market share, with Nissan in second place with a 16.4% market share. Ford and Isuzu claimed 8.6% and 6.2%, respectively, of the number of light commercial vehicles sold thus far in 2020. Mercedes leads the medium commercial vehicle segment with 37.1% of sales year-to-date, while Scania was number one in the heavy and extra-heavy commercial vehicle segment with 22.4% of the market share year-to-date.

The Bottom Line

While the number of new vehicles sold in February is higher than the number sold in the prior two months, the cumultative number of new vehicles sold continues to decline on a rolling 12-month basis, and is trending at the lowest level in ten years. The downward trend in vehicle sales is likely to continue for the rest of the year as there are no indicators that economic conditions will improve substantially any time soon. Historical data indicates that new vehicle sales typically pick-up somewhat in March, however we are of the view that the increase in sales for the month will be relatively small. Recent new vehicle sales figures suggest that vehicle owners are either holding on to the vehicles they already own or purchasing second hand and imported vehicles.