Category Archives: Inflation

The Namibian annual inflation rate rose to 3.9% y/y in April, with prices in the overall NCPI basket increasing by 0.4% m/m. On a year-on-year basis, overall prices in six of the twelve basket categories rose at a quicker rate in April than in March and three of the basket categories recording slower rates of inflation, while three of the basket categories remained constant. Prices for goods increased by 5.2% y/y while prices for services rose by 2.1% y/y.

Food & non-alcoholic beverages, the second largest basket item by weighting, continued to be the largest contributor to annual inflation, accounting for 1.2 percentage points of the total 3.9% inflation rate. Prices in this category increased by 0.4% m/m and 5.9% y/y. Prices in eleven of the sub-categories recorded price increases on an annual basis, while warm beverage prices fell 0.5% y/y and non-alcoholic beverage prices remained unchanged. The largest increases were observed in the prices of meat which increased by 15.83% y/y, fruit which rose by 10.55% y/y and oils and fats, which increased by 7.50% y/y.

The alcoholic beverages and tobacco basket item was the second largest contributor to the annual inflation rate in April, with prices increasing by 4.2% y/y. On a monthly basis, prices in this basket item rose by 0.4%. The alcoholic beverages sub-category recorded a price increase of 0.3% m/m and 3.3% y/y. Tobacco prices rose 1.1% m/m, and 8.3% y/y.

The housing and utilities, transport, and miscellaneous categories each accounted for 0.30 percentage points of the total annual inflation rate in April. Price inflation for housing and utilities remained steady on a monthly basis but rose 1.3% y/y. The regular maintenance and repair of dwellings subcategory recorded an increase in prices of 6.8% y/y. Prices in the electricity, gas and other fuels subcategory rose 0.9% y/y, while the annual inflation for rental payments stood at 1.3% y/y. Transport prices rose 1.2% m/m and 7.5% y/y, which was driven by the operation of personal transport equipment, which rose 1.9% m/m and 8.1% y/y, the increase resulting from a low fuel price base a year ago. Prices in the miscellaneous category rose 0.4% m/m and 6.6% y/y.

The rising inflation rate is to be expected as, the measurement period includes a low base, due to the lockdown restrictions that constrained economic activity a year ago and Namibia is in now a recovery phase of the business cycle as it emerges from a trough. IJG’s inflation model forecasts an average inflation rate of 3.6% y/y in both 2021 and 2022, indicating moderate inflation over the next two years. Seeing as inflation seems to be relatively contained and expectations for economic growth are also relatively low, we expect the central banks to remain reluctant to intervene with tighter monetary policies such as hiking interest rates. The South African Reserve Bank’s Monetary Policy Committee will meet this week and the South African repo rate is expected to remain steady at 3.5%.

The Namibian annual inflation rate rose to 3.1% y/y in March, with prices in the overall NCPI basket increasing by 0.5% m/m. On a year-on-year basis, overall prices in six of the twelve basket categories rose at a quicker rate in March than in February and five of the basket categories recording slower rates of inflation, while education remained constant. Prices for goods increased by 3.9% y/y while prices for services rose 2.1% y/y.

Food & non-alcoholic beverages, the second largest basket item by weighting, continued to be the largest contributor to annual inflation, accounting for 1.2 percentage points of the total 3.1% inflation rate. Prices in this category increased by 1.2% m/m and 6.6% y/y. Prices in all the thirteen sub-categories recorded price increases on an annual basis. The largest increases were observed in the prices of meat which increased by 13.33% y/y, fruit which rose by 10.73% y/y and oils and fats, which increased 9.37% y/y.

The alcoholic beverages and tobacco basket item was the second largest contributor to the annual inflation rate in March, with prices increasing by 3.8% y/y. On a monthly basis, prices in this basket item fell by 0.2%. The alcoholic beverages sub-category recorded a price decrease of 0.4% m/m, but an increase of 2.5% y/y. Tobacco prices rose 0.5% m/m, and 9.8% y/y.

The housing and utilities, transport and miscellaneous categories each accounted for 0.30 percentage points of the total annual inflation rate in March. Price inflation for housing and utilities remained steady on a monthly basis but rose 1.1% y/y. The regular maintenance and repair of dwellings subcategory recorded an increase in prices of 6.4% y/y, which is a higher rate of increase than the 3.1% y/y registered the previous month. Prices in the electricity, gas and other fuels subcategory fell 0.4% y/y, while the annual inflation for rental payments rose to 1.3% y/y. Transport prices rose 2.0% m/m and 2.4% y/y, which was driven by vehicle purchase prices, which rose 8.0% y/y as well as the operation of personal transport equipment, which rose 3.4% m/m and 0.85% y/y. Prices in the miscellaneous category fell 0.1% m/m but rose 6.4% y/y.

Namibia’s inflation rate crept below the South African Reserve Bank’s lower target band of 3.0% for 16 consecutive months, before reaching 3.1% in March 2021. The 16 months of low inflation reflects Namibia’s depressed economy, which contracted further in 2020 due to Covid-19. During this time business activity declined, while unemployment rose, putting downward pressure on prices. Altogether, these factors created a lower base for prices, making increasing inflation inevitable in the recovery of the Namibian economy. Furthermore, rental prices declined 2.3% y/y between December 2019 and December 2020. Due to its 23.3% weighting in the overall basket its effect on overall inflation is amplified. Rental prices however rose 1.34% between December 2020 and March 2021, which increased overall inflation. IJG’s inflation model forecasts an average inflation rate of 3.5% y/y in 2021 and 3.6% in 2022, indicating a gradual increase in the inflation rate over the next two years and that inflation will likely remain relatively low over this period.

The Namibian annual inflation rate remained at 2.7% y/y in February, with prices in the overall NCPI basket increasing by 0.4% m/m. On a year-on-year basis, overall prices in six of the twelve basket categories rose at a quicker rate in February than in January and the other half of the basket categories recording slower rates of inflation. Prices for goods increased by 3.2% y/y while prices for services rose 2.0% y/y.

Food & non-alcoholic beverages, the second largest basket item by weighting, continued to be the largest contributor to annual inflation, accounting for 1.0 percentage point of the total 2.7% inflation rate. Prices in this category increased by 1.2% m/m and 5.5% y/y. Prices in twelve of the thirteen sub-categories recorded increases on an annual basis. The largest increases were observed in the prices of fruits which increased by 11.85% y/y and meat which increased by 11.84% y/y. The fish sub-category meanwhile saw a marginal price decrease of 0.6% y/y in February.

The alcoholic beverages and tobacco basket item was the second largest contributor to the annual inflation rate in February, with prices of the basket item increasing by 4.2% y/y. On a monthly basis, prices in this basket item fell by 0.4%. The alcoholic beverages sub-category recorded a price decrease of 0.4% m/m, but an increase of 3.0% y/y. Tobacco prices were down 0.2% m/m, but up 9.7% y/y.

The housing and utilities category accounted for 0.39 percentage points of the total annual inflation rate in February. Price inflation for this category remained steady on a monthly basis, but rose 1.5% y/y. The regular maintenance and repair of dwellings subcategory recorded an increase in prices of 3.1% y/y, which is a lower rate of increase than the 4.2% y/y registered the previous month. Prices in the electricity, gas and other fuels subcategory increased by 2.2% y/y, while the annual inflation for rental payments rose to 1.3% y/y. None of the four subcategories printed price increases on a month-on-month basis.

In the US inflation expectations have been heightened by the Fed’s prolonged loose monetary policy and President Joe Biden’s US$1.9 trillion stimulus package. These rising inflation expectations are putting pressure on central banks as they seek to ensure a smooth recovery.

On the local front, however, IJG’s inflation model forecasts an average inflation rate of 3.2% y/y in 2021 and 4.3% in 2022, indicating a gradual increase in the inflation rate over the next two years and that inflation will likely remain relatively low over this period. This, coupled with high unemployment and struggling economic growth in both Namibia and South Africa, means that we currently see it as unlikely that interest rates will be raised in either country in the short-term.