Category Archives: Inflation

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.

The Namibian annual inflation rate ticked up to 2.7% y/y in January, following the 2.4% y/y increase in prices recorded in December. Prices in the overall NCPI basket increased by 0.9% m/m. On a year-on-year basis, overall prices in nine of the twelve basket categories rose at a quicker rate in January than in December, while the other three recorded slower rates of inflation. Prices for goods increased by 3.2% y/y while prices for services increased by 2.0% y/y.

Food & non-alcoholic beverages, the second largest basket item in weighting, accounted for 0.9 percentage points of the total inflation figure. Food and non-alcoholic beverage prices increased by 5.2% y/y, moderating from the 7.6% y/y recorded in December. 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 13.6% y/y and vegetables which increased by 12.4% y/y. The fish sub-category meanwhile saw a marginal price decrease of 0.3% y/y in January.

Alcoholic beverages and tobacco prices, making up approximately 12.6% of the overall inflation basket, was the second highest contributor to the annual inflation rate in January, with prices of the basket item increasing by 0.8% m/m and 5.0% y/y. The main driver in this basket category was tobacco prices which increased by 10.3% y/y while alcohol prices rose by 3.8% y/y.

The miscellaneous goods & services basket recorded inflation of 6.7% m/m and 6.5% y/y, and contributed 0.35 percentage points to the overall annual inflation figure. The financial services sub-category recorded a rather hefty price increase of 27.2% m/m and 24.0% y/y. The four other subcategories (personal care, personal effects, insurance and other services) all recorded quicker inflation on a month-on-month basis but recorded slower inflation on a year-on-year basis.

Despite the second consecutive uptick, the Namibian annual inflation rate continues to trend lower than that of neighbouring South Africa’s inflation rate. According to the NSA, the prices for the rental payments for dwellings sub-category rose by only 0.6% y/y in January. As rental payments make up a large portion (23.3%) of the CPI basket, the low inflationary adjustment means that Namibian annual inflation in 2021 is likely to remain well below Namibia’s long-run average. IJG’s inflation model forecasts an average inflation rate of 2.9% y/y in 2021 and 4.3% in 2022, indicating a steady increase in the inflation rate over the next two years. We remain of the view that the largest upside risk to this forecast is higher food costs and fuel prices.