Category Archives: Inflation

Namibia’s annual inflation rate rose to 4.5% y/y in December, with prices in the overall NCPI basket increasing by 0.4% m/m. The annual average inflation rate for 2021 was 3.6%, compared to 2.2% in 2020 and 3.7% in 2019. Year-on-year, overall prices in three of the twelve categories rose at a quicker rate in December than in November, six categories experienced disinflation and three categories posted steady inflation. Prices for services rose by 2.7% y/y and prices for goods rose by 5.8% y/y.

Transport continues to be the largest contributor to annual inflation, with prices in this category increasing by 2.1% m/m and 14.3% y/y. This basket item contributed 2.0 percentage points to the annual inflation rate in December. Prices in two of the three sub-categories recorded price increases, with the “operation of personal transport equipment” increasing by 19.7% y/y. This is mostly attributable to a 36.1% y/y increase in the price of petrol and diesel. This was the largest year-on-year increase in fuel prices for 2021. Current forecasts are that global oil prices will continue to increase this year with some analysts predicting that a lack of production capacity and limited investment in the sector will result in demand outstripping supply. We thus expect fuel prices to remain elevated for the majority of 2022.

Food & non-alcoholic beverages was the second biggest contributor to the annual inflation rate in December, contributing 0.9 percentage points. Prices in this basket item remained steady on a monthly basis but increased by 5.1% y/y. Only one sub-category, vegetables, recorded a decrease in prices on an annual basis of 1.1%. The twelve other sub-categories all recorded price increases on an annual basis. Fruit prices increased by 14.9% y/y, oils and fats by 11.9% y/y and meat prices by 11.8%.

Alcohol & Tobacco inflation accelerated from 2.8% y/y in November to 3.8% y/y in December and was the third-largest contributor to December’s annual inflation rate. The prices of tobacco products rose by 0.8% m/m and 6.2% y/y, while the prices of alcoholic beverages increased by 0.4% m/m and 3.2% y/y.

The 4.5% y/y annual inflation rate for December was in line with IJG’s average inflation forecast of 4.3% y/y for the month. IJG’s inflation model forecasts an average inflation rate of 4.3% y/y in 2022 and 3.5% in 2023. Following the SARB’s 25 basis point hike last year, South Africa’s inflation rate accelerated to 5.5% y/y in November, uncomfortably close to the SARB’s upper bound of 6.0% y/y. The MPC committee will meet again on 27 January, which will set the stage for the BoN’s next meeting scheduled for 16 February. We expect the BoN to follow suit on any rate decisions made by the SARB.

Namibia’s annual inflation rate rose to 4.1% y/y in November, with prices in the overall NCPI basket increasing by 0.6% m/m. Year-on-year, overall prices in eight of the twelve categories rose at a quicker rate in November than in October, two categories experienced slower rates of inflation and two categories posted steady inflation. Prices for services rose by 2.4% y/y and prices for goods rose by 5.4% y/y.

Transport was the largest contributor to annual inflation in November, with prices in this category increasing by 1.5% m/m and 11.9% y/y. This basket item contributed 1.6 percentage points to the annual inflation rate in November. Prices in all three sub-categories recorded price increases, with the sharpest increase coming in “operation of personal transport equipment”. This is due mostly to a 27.4% y/y increase in the price of petrol and diesel. This is the largest year-on-year price increase in fuel seen so far this year. As was the case last month, this increase is explained by both base effects and an ongoing shortage in global oil supply.

Predictably, food & non-alcoholic beverages was the second biggest contributor to the annual inflation rate in October, contributing 1.0 percentage points.  Prices in this basket item increased by 0.3% m/m and 5.2% y/y. On a yearly basis all sub-categories, except for vegetables & tubers, registered price increases. Namibia’s continued reliance on South Africa for food imports means than whenever transport costs rise it is all but inevitable that the price of food will rise accordingly.

Inflation rates in the remainder of the categories were relatively subdued. Alcohol & Tobacco was the third largest contributor to November’s annual inflation rate, with prices increasing by 2.0% m/m and 2.8% y/y. The prices of alcoholic beverages, the more heavily weighted of the two sub-categories in this basket, increased by 2.3% y/y while the price of tobacco products, the other sub-category, increased by 5.2% y/y in November.

The 4.1% y/y annual inflation rate for November came in above IJG’s average inflation forecast for the month. IJG’s last estimate was that inflation would rise to 3.8% y/y in November. A hawkish shift in the Fed’s tone has led to debate as to whether the US central bank will taper asset purchases at a faster rate than it had previously indicated. This, as well as a 25bps SARB rate hike in late November, lends credence to the argument that inflation risks both globally, and in southern Africa, remain to the upside. In our previous report our inflation model forecast average annual inflation for 2022 at 3.9% y/y. A spike in Namibia’s CPI and a deterioration in the rand has pushed that estimate up to 4.2% y/y. The estimated upper bound for average annual inflation in Namibia for 2022 is now 5.2% y/y.

The Namibian annual inflation rate rose to 3.6% y/y in October of the back of a 3.5% y/y increase in prices in September. Prices in the overall NCPI basket rose by 0.2% m/m. Year-on-year, overall prices in five of the twelve categories rose at a quicker rate in October than September, five categories experienced slower rates of inflation and two categories posted steady inflation. Prices for services rose by 2.4% y/y and prices for goods rose by 4.5% y/y.

Prices in the transport category increased by 0.7% m/m and 10.7% y/y. As such, transport was the largest contributor to annual inflation in October, contributing 1.5 percentage points to the total 3.6% y/y inflation rate. Prices in all three of the sub-categories recorded increases on an annual basis. Vehicle prices increased by 10.4% y/y, public transport costs increased by 3.5% y/y and prices in the sub- category “operation of personal transport equipment” increased by 13.6% y/y.  A 22.4% y/y increase in the price of petrol and diesel is responsible for much of this increase. This increase is due partially to base effects as the price of fuel decreased by 11.3% m/m and 12.5% y/y in October 2020. A global shortage in oil supply is the other major factor contributing to increases in the price of fuel.

The last year and a half have seen taxi fares at their most volatile. The price of taxis increased by 3.9% y/y in October. This comes after two-consecutive months of 8.7% y/y decreases. Looking further back, in May 2020 taxi fares rose by a remarkable 13.6% m/m, held steady for a few months and then declined by 11.3% m/m in October 2020, according to the Namibia Statistics Agency. Another month-on-month spike in June 2021, a 14.6% m/m increase, was followed by a 9.9% m/m decrease in August 2021. This volatility has led to uncharacteristic oscillations in the year-on-year price movements of taxi fares.

Food & non-alcoholic beverages was the second biggest contributor to the annual inflation rate in September, contributing 1.0 percentage point. Prices in this basket increased by 0.9% m/m and 5.2% y/y. All sub-categories registered price increases on a monthly basis. Additionally, all sub-categories except for one, vegetables & tubers, registered price increases on a yearly basis. The largest year-on-year price increases came in the oils & fats and fruit categories, with increases of 16.9% y/y and 15.4% y/y respectively.

Inflation for the rest of the categories were relatively subdued, with the miscellaneous category being the third largest contributor to October’s annual inflation rate, increasing by 0.1% m/m and 6.6% y/y. Surprisingly, the category alcoholic beverages & tobacco was not amongst the largest contributors to annual inflation in October. Prices for alcoholic beverages decreased by 0.9% m/m and 0.1% y/y while prices for tobacco products increased by 0.7% m/m and 5.9% y/y.

The 3.6% y/y annual inflation rate is in line with IJG’s average inflation forecast for the year. IJG’s inflation model predicted that annual inflation would be 3.5% y/y in October. Inflation risks globally and in Namibia remain to the upside. Our model currently estimates that inflation will rise to 3.8% y/y in November and 4.0% y/y in December.  Average inflation for 2022 is forecast at 3.9% y/y. The estimated upper bound for average annual inflation in Namibia for 2022 is 5.0% y/y. Should the value of the rand continue to deteriorate, and if oil prices continue to rise, the forecast will inevitably trend towards the upper bound.