Category Archives: Inflation

Namibian inflation slowed to 3.4% y/y in August on the back of a 4.0% y/y increase in prices in July. Accordingly, prices in the overall NCPI basket decreased by 0.2% m/m. On an annual basis, overall prices of five of the twelve categories rose at a quicker rate in August than July, while five categories experienced slower rates of inflation and two categories posted steady inflation. Tellingly, inflation in the food and non-alcoholic beverages category, which has the second largest weighting in the NCPI, slowed from 6.1% y/y in July to 5.2% y/y in August. Prices for goods increased by 4.8% y/y while prices for services increased by 1.7% y/y in August.

Predictably, food and non-alcoholic beverages, alongside transport, accounted for most of the 3.5% y/y increase in the NCPI in August. Food and non-alcoholic beverages contributed 1.0 percentage points while transport contributed 0.9 percentage points to the annual inflation figure. Prices in these categories are highly correlated, with increases in one category often predicting increases in the other. Prices for transport, the third largest basket item in weighting, decreased by 1.6% m/m in August. This is the largest month-on-month decrease of all categories in the NCPI. The NSA data, somewhat bizarrely, shows that the prices for public transportation services fell by 9.9% m/m and 8.7% y/y. No explanation was given for this decline.

Housing, water and electricity contributed 0.4 percentage points to the annual inflation figure in August, recording an increase of 0.1% m/m and 1.6% y/y. The regular maintenance and repair of dwelling was the only sub-category which recorded a slower rate of increase at 8.3% y/y. The electricity, gas and other fuels and water supply, sewerage service and refuse collection sub-categories posted quicker inflation of 2.8% y/y and 1.4% y/y, respectively. Alcohol and tobacco products round off the top five biggest contributors to inflation this month alongside miscellaneous goods.       

The 3.4% y/y inflation rate is exactly in line with IJG’s inflation forecast for the year. Risks remain to the upside, with the Delta variant threatening to slow economic growth in much of the world, coupled with microchip shortages threating the global supply of tech products and new vehicles as well as escalating shipping costs. However, significant price shocks are unlikely to materialise in short term given that businesses are unlikely to raise prices as consumer confidence and disposable income both remain low. IJG’s inflation model currently forecasts an average inflation of 3.4% y/y in 2021 and 3.0% y/y in 2022. Economic growth is likely to remain slow in the coming years and inflation is likely to remain muted.

The annual Namibian Inflation rate slowed marginally to 4.0% in July, following the 4.1% y/y increase in June. The prices in the overall NCPI basket increased by 0.2% m/m. On a year-on-year basis, the overall prices of seven of the twelve basket categories rose at a quicker rate in July than in June, while three categories experienced slower rates of inflation and two categories posted steady inflation. Prices for goods increased 5.4% y/y while prices for services increased by 2.2% y/y in July.

The transport and food categories were the largest contributors to annual inflation, making up 1.4 and 1.1 percentage points respectively. These were the main drivers of inflation in July. Food prices fell 0.4% m/m but rose 6.1% y/y, with all sub-categories except one increasing on an annual basis. Despite a bumper harvest for some vegetable products, Namibia’s reliance on South Africa for food imports is reflected in the increased prices of meat, oil and fats, and fruit. Increased transport prices have resulted from the recent upward trend in global oil prices and the depreciation of the Namibian dollar against the US dollar, making imports more expensive. 

Alcoholic beverages and tobacco prices contributed 0.3 points to annual inflation, as they did in June, increasing by 0.8% m/m and 2.5% y/y in July. The miscellaneous category also contributed 0.3 percentage points to inflation alongside transport and housing, water and electricity. Driven by higher fuel prices, transport costs have increased by 1.0% m/m and 10.6% y/y in July.

The 4.0% y/y increase in annual inflation is towards the upper end of IJG’s inflation forecast for the year. The main driver of inflation in the last couple of months has been food inflation which has been averaging 6.2% y/y since the beginning of the year. While risks remain to the upside, we see these as muted in the short-term in what is currently a very accommodative global monetary environment. Higher oil prices remain the largest risk in the short-term, while domestic and South African fiscal deterioration pose medium-term risks as debt levels increase unchecked, eating into the already limited productive portion of expenditure. IJG’s inflation model currently forecasts an average inflation rate of 3.7% y/y in 2021 and in 2022. Given that economic growth is expected to be low, and that inflation will likely remain muted, we expect monetary policy to remain accommodative over the short- to medium-term. 

The annual Namibian inflation rate accelerated to 4.1% in June, following the 3.8% y/y uptick in prices in May. The prices in the overall NCPI basket increased by 0.5% m/m. On a year-on-year basis, overall prices in three of the twelve basket categories rose at a quicker rate in June than in May, while five categories experienced slower rates of inflation and four categories posted steady inflation. Prices for goods increased 5.5% y/y while prices for services accelerated to 2.1% y/y in June, compared to the 1.3% y/y increase recorded in May.

The food and transport categories were the largest contributors to annual inflation, making up 1.3 percentage points each of the annual inflation rate and together were the main drivers of inflation in June. Transport prices rose 2.5% m/m and 9.6% y/y. The Road User Levy increased by seven cents per litre in June, contributing to higher fuel prices, which have already been on the rise from the low base a year ago. The Rand also weakened against the US Dollar during June, which further elevated fuel prices.

Food prices rose 0.3% m/m and 7.3% y/y, with prices in all thirteen sub-categories increasing on an annual basis. Namibia is relatively dependant on South Africa for food imports, which would have experienced a spillover effect from the increased transport costs, as well as near all-time high fuel costs in South Africa. The largest increases were witnessed in the oils and fats sub-category, which recorded a 16.7% y/y increase, followed by meat, which posted a 16.0% y/y increase in prices and vegetables, which rose 6.8% y/y. 

Alcoholic beverages and tobacco prices contributed 0.3 points to the annual inflation rate, increasing by 0.4% m/m and 2.5% y/y in June. The miscellaneous category also contributed 0.3 points to the annual inflation rate, although decreasing by 0.2% m/m, the category rose posted a price increase of 6.4% y/y.

The 4.1% y/y increase in annual inflation is at the upper-end of IJG’s inflation forecast for the year, as we expect inflation to average 3.8% y/y in both 2021 and 2022. Rising inflation rates have also been witnessed recently in South Africa and, as such, the South African Reserve Bank imposing rate hikes this year is not an impossibility, however, monetary policy is expected to remain accommodative. The Bank of Namibia is expected to follow suit to whichever strategy the SARB pursues. Overall, we expect the annual inflation rate to remain near the mid-point of the SARB’s inflation range for the rest of the year.