Category Archives: Inflation

The Namibian annual inflation rate rose to 3.5% y/y in September after it had slowed to 3.4% in August. Prices in the overall NCPI basket rose by 0.3% m/m. On a year-on-year basis, overall prices in five of the twelve categories rose at a quicker rate in September than August, five categories experienced slower rates of inflation and two categories posted steady inflation. Prices for services rose by 1.7% y/y while prices for goods rose by 4.8% y/y.

Transport, the third largest basket item by weighting, was the largest contributor to annual inflation, contributing 1.0 percentage point to the total 3.5% y/y inflation rate. Prices in this category increased by 1.5% m/m and by 7.5% y/y in September. Prices in two of the three sub-categories recorded increases on an annual basis. Vehicle prices increased by 10.4% y/y and prices in the sub-category “operation of personal transport equipment” increased by 11.6% y/y. The price of public transport services decreased by 8.3% y/y. Due to base effects, we are likely to see another year-on-year increase in this sub-category in October, which will put further upward pressure on the transport inflation print.

The increases in transport costs can be attributed partly to increases in the price of oil. A lack of investment in the supply of oil (constructing new oil rigs and refineries), coupled with a sustained increase in global demand for energy means that prices for oil are expected to remain high in the short to medium-term. In summary, rising transport costs, driven by sustained increases in the price of oil, are likely to continue exerting upward pressure on the inflation figure as we are likely to see second round effects should transport prices remain elevated.  

Food & non-alcoholic beverages was the second biggest contributor to the annual inflation rate in September, contributing 0.9 percentage points. Prices in this basket category increased by 0.1% m/m and 5.0% y/y. All sub-categories registered price increases on an annual basis. The largest increases were observed in the oils and fats subcategory, which increased by 17.7% y/y, and meat prices, which rose by 12.1% y/y. On a monthly basis, twelve of the thirteen sub-categories saw price increases while only the price of vegetables decreased, by 2.3% m/m.  

The third largest contributor to the annual inflation rate in September was the alcohol & tobacco basket item, recording inflation of 0.5% m/m and 3.0% y/y. The prices of alcoholic beverages increased by 0.3% m/m and 1.8% y/y while the price of tobacco products increased by 1.1% m/m and 8.6 % y/y.

The 3.5% 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 rate would be 3.4% y/y in September. Inflation risks remain to the upside. Elevated global shipping costs and the ongoing shortage of microchips and semiconductors pose a threat to production in a variety of industries. IJG’s inflation currently predicts that annual inflation will rise to 3.6% y/y in November and 3.8% y/y in December 2021. Average annual inflation for 2022 is forecast at 3.6% y/y. Given current data, the estimated upper bound for annual inflation in Namibia in 2022 is 4.7% y/y. The current uncertainty in the global economy makes this is a highly tentative prediction. 

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.