Category Archives: Inflation

The Namibian annual inflation rate rose to 6.8% y/y in July, the quickest pace since March 2017. On a month-on-month basis, inflation remained steady at 1.0% m/m. Year-on-year, overall prices in eight of the twelve basket categories rose at a quicker rate in July than in June, two categories experienced slower rates of inflation and two categories posted steady inflation. Prices for goods increased by 10.0% y/y, the fastest since February 2009, while prices for services rose by 2.5% y/y.

Transport, the third largest basket item by weighting, was the largest contributor to annual inflation, contributing 3.0 percentage point to the total 6.8% y/y inflation rate. Prices in this category increased by 3.0% m/m and by 20.9% y/y in July, the largest year-on-year increase on our records dating back to 2003. All three sub-categories in this basket recorded increases on a month-on-month basis. Operation of personal transport equipment recorded the largest increase in prices of 4.4% m/m and 35.5% y/y, attributable to the N$1.88 and N$1.34 per litre increase in petrol and diesel prices, respectively, at the start of July. Year-to-date, petrol and diesel prices are up 42.4% and 46.1% respectively. The purchase of vehicles sub-category recorded inflation of 0.9% m/m and 5.2% y/y. Prices of public transportation services rose 0.1% m/m, but fell 4.1% y/y.

Food & non-alcoholic beverages was the second largest contributor to the annual inflation rate in July, contributing 1.5 percentage points. Prices in this basket item rose 0.8% m/m and 8.4% y/y, the quickest year-on-year increase since February 2017. All sub-categories registered price increases on an annual basis. The largest increases were observed in the oils and fats sub-category, which increased by 26.5% y/y and fruits, which rose by 24.5% y/y. On a monthly basis, twelve of the thirteen sub-categories saw price increases with only the meat sub-category recording a price decrease of 1.1% m/m.

The third largest contributor to the annual inflation rate in July was the alcohol & tobacco basket item, recording inflation of 0.4% m/m and 5.4% y/y. The prices of alcoholic beverages increased by 0.4% m/m and 5.4% y/y while the price of tobacco products increased by 0.6% m/m and 5.4% y/y.

Namibia’s annual inflation rate has consistently been trending higher since August last year, and as mentioned earlier in the report, July’s print is the quickest since March 2017. While the rate is high, it is by no means extraordinary for Namibia, as it has reached (and breached) this level a couple of times over the past two decades. Rising transport and food prices continue to be the main drivers for Namibia’s inflation rate, with the two categories contributing 67% to the annual inflation rate in July. Higher transport costs should continue to filter through to other categories of goods and services via second round effects, but runaway domestic inflation is unlikely. A similarly high inflation rate in South Africa has prompted the South African Reserve Bank (SARB) to pick up the pace of tightening monetary policy, with the 75 bp rate hike in July coming in higher than most forecasts. The SARB appears to be front-loading rate increases, opting to stay ahead of central banks in developed markets, and reinforcing its commitment to anchoring inflation expectations and to preserve its credibility. We expect the Bank of Namibia’s MPC to respond in-kind at their August meeting. IJG’s inflation model currently forecasts the annual Namibian inflation rate to continue ticking higher over the next couple of months, and to average between 5.9% and 6.5% in 2022, before gradually moderating to an average of 5.6% in 2023.

Namibia’s annual inflation rate rose to 6.0% y/y in June, following the 5.4% y/y increase in prices recorded in May. June’s CPI print was the highest since June 2017. Prices in the overall NCPI basket rose by 1.0% m/m. On a year-on-year basis, overall prices in ten of the twelve basket categories rose at a quicker rate in June than in May, one recorded a slower rate and one remained steady. Prices for goods increased by 8.7% y/y, the quickest increase in 13 years, while prices for services increased by 2.2% y/y.

Transport was unsurprisingly again the largest contributor to the annual inflation rate in June, contributing 2.7 percentage points to the annual inflation rate. The category recorded price increases of 4.1% m/m and 18.6% y/y. All three sub-categories in this basket recorded increases on a month-on-month basis with the operation of personal transport equipment sub-category recording the largest increase in prices of 6.4% m/m and 32.0% y/y on the back of the Ministry of Mines and Energy’s decision to increase fuel at the beginning of June. Petrol prices rose by 250 cents per litre and diesel increased by 150 cents per litre, resulting in fuel price inflation reaching 56.9% y/y in June. The purchase of vehicles sub-category recorded inflation of 0.6% m/m and 4.4% y/y. Prices of public transportation services rose 0.01% m/m, in line with last month’s rate, but fell 4.2% y/y. Transport inflation is expected to remain elevated over the short- to medium-term as July saw another fuel price increase by the Ministry of Mines and Energy and the temporary drop in fuel levies are expected to be reversed in August. Global crude oil prices have retreated somewhat from the highs recorded in June, but the weakness in the South African rand has offset some of this.

Food & non-alcoholic beverages was the second biggest contributor to the annual inflation rate in June, contributing 1.3 percentage points. Overall, prices in this basket item rose 0.7% m/m and 7.0% y/y. As seen in prior months, all thirteen sub-categories in this basket recorded price increases on an annual basis. The largest increases were recorded in the prices of oils and fats which rose by 26.2% y/y, followed by fruit, which recorded an increase of 18.1% y/y. According to the United Nations’ FAO Food Price Index, which measures the monthly change in international prices of a basket of food commodities, prices fell by 2.3% m/m in June but is still 23.1% higher than a year ago. This was a third consecutive decline, and could potentially lead to lower local food prices, should the international trend continue.

Alcohol & tobacco inflation quickened from 4.7% y/y in May to 5.8% y/y in June. On a month-on-month basis, prices in the basket rose by 1.4%. The prices of alcoholic beverages increased 1.7% m/m and 5.9% y/y while tobacco prices fell by 0.1% m/m but rose by 5.0% y/y.

Namibia’s annual inflation rate continues to trend above its 12-month average of 4.5%. Transport inflation alone accounted for nearly half (45%) of the inflation print in June with rising fuel prices driving most of the increase. Inflationary pressures are expected to remain high for the rest of the year. The low services inflation print points to subdued domestic economic activity and again indicates that inflation is very much supply side driven at present. South Africa’s inflation rate of 6.5% in May breached the SARB’s 3-6% target band for the first time since 2017 and will mean that we can expect to see further rate hikes by the SARB’s MPC. We expect the BoN to respond in kind to any rate decisions taken by the SARB. IJG’s inflation model currently forecasts inflation to average between 5.9% and 6.3% in 2022.

The Namibian inflation rate slowed to 5.4% y/y in May from 5.6% y/y in April. Prices in the overall NCPI basket rose by 0.1 % m/m, slower than the 1.4% m/m increase recorded in April. On a year-on-year basis, overall prices in four of the twelve basket categories rose at a faster rate in May than in April, with five categories recording slower rates of inflation and three categories recording prices consistent with April. Prices for goods increased by 7.1% y/y while prices for services increased by 3.1% y/y in May.

Transport continues to be the largest contributor to the annual inflation rate, contributing 2.4 percentage points to the total 5.4% y/y inflation rate in May. Overall, prices in the transport category declined by 1.2% m/m, but rose 16.7% y/y. The three sub-categories in the transport basket item all recorded slower inflation on both a monthly and annual basis in May, except for the public transport services category which recorded steady inflation on an annual basis. The slower inflation follows the Ministry of Mines and Energy’s decision at the beginning of May to temporarily reduce the levies imposed on fuel products for a period of three months and to decrease the petrol price by 120 cents per litre and the diesel price by 30 cents per litre in May. According to the Namibian Statistics Agency (NSA) data, prices of public transport services rose by 9.8% y/y in May, unchanged from April. Prices of operating personal transport equipment declined by 2.1% m/m but rose by 24.4% y/y, while the prices of purchasing vehicles rose 0.5% m/m and 3.5% y/y in May. The Ministry of Mines and Energy’s decision to increase fuel prices again in June negates the fuel levy relief granted and will result in even higher fuel prices in August should the reduction in fuel levies not be extended beyond July.

The food & non-alcoholic beverages basket item was the second biggest contributor to the annual inflation rate in May, contributing 1.2 percentage points. Prices in this basket item rose by 1.5% m/m and 6.6% y/y in May. All thirteen sub-categories in this basket recorded price increases on an annual basis, as has been the case since January this year. The largest increase was again recorded in the prices of oils and fats which rose by 27.4% y/y, followed by fruit, which saw price increases of 16.5% y/y. The prices of bread and cereals rose by 7.6% y/y, milk, cheese, and eggs by 5.4% y/y, vegetables by 3.9% y/y, and meat by 3.4% y/y in May.

The alcohol & tobacco basket item, the third-largest contributor to the annual inflation rate, recorded higher inflation at 4.7% y/y in May, compared to the 4.5% y/y observed in April. On a monthly basis, prices in the basket item remained steady. The prices of tobacco products rose by 0.1% m/m and 6.3% y/y, while the prices of alcoholic beverages declined by 0.1% m/m but rose 4.3% y/y in May.

Namibia’s annual inflation rate of 5.4% in May was slightly slower than the rate recorded last month and was mainly the result of relatively lower fuel costs in May. The Inflation rate for petrol and diesel slowed from 47.7% y/y in April to 42% y/y in May. Despite this decline, rising food and transport prices remain the primary drivers of the Namibian inflation rate, with the two categories alone contributing over two-thirds to the country’s annual rate in May. The persistent inflationary pressures, and the SARB’s MPC decision to hike rates in May, necessitated the Bank of Namibia’s MPC to also raise interest rates by 50 basis points in June. The MPC noted in its announcement that it will continue to monitor developments in inflation to ensure price stability in the interest of the sustainable economic development of the country. IJG’s inflation model currently forecasts inflation to average between 5.0% and 6.2% in 2022.