Category Archives: Inflation

The Namibian annual inflation rate moderated slightly to 2.2% y/y in November, following the 2.3% y/y increase in prices recorded in October. Prices in the overall NCPI basket increased by 0.1% m/m, as inflationary pressure remains subdued. Overall, prices in five of the twelve basket categories rose at a faster annual rate than in October, while four categories recorded slower rates of inflation and two categories posted steady inflation. Prices for goods increased by 3.3% y/y while prices for services increased by 0.8% y/y.

As it has been the case since April this year, food & non-alcoholic beverages were the largest contributors to annual inflation in November, accounting for 1.2 percentage points of the total 2.2% annual inflation rate. Prices in this category rose 0.3% m/m and 6.9% y/y. Prices in all thirteen sub-categories recorded increases on a year-on-year basis with the largest increases being observed in the prices of fruits which increased by 16.1% y/y and vegetables which increased by 11.5% y/y. Price increases in oils and fats, and meat products quickened to 11.4% y/y and 10.8% y/y respectively.

Alcoholic beverages and tobacco, the third-largest basket item by weighting, was the second-largest contributor to the annual inflation rate in November, contributing 0.6 percentage points to the total 2.2% annual inflation rate.  The basket item recorded a price increase of 0.2% m/m and 4.6% y/y during the month. Prices for alcoholic beverages increased at a rate of 0.1% m/m and 3.6% y/y, while tobacco prices rose by 0.5% m/m and 9.2% y/y.

The education basket, the basket item with the eighth largest weighting (at only 3.6% of the CPI basket), was the third-largest contributor to the annual inflation rate. Primary and secondary education recorded price increases of 9.3% y/y, while tertiary education prices rose by 5.3% y/y. None of the three subcategories printed price increases on a month-on-month basis.

As expected, inflationary pressure in Namibia remains extremely subdued and the Namibian inflation rate continues to trend lower than neighbouring South Africa’s October figure (latest available release) of 3.3%. IJG’s inflation model forecasts an average inflation rate of 2.2% y/y in 2020 and 3.2% y/y in 2021. Global oil prices remain one of the larger risks to our inflation forecast. However, the announcement by the Ministry of Mines and Energy at the beginning of December to cut the petrol and diesel prices by 30 cents and 20 cents per litre respectively, means that the lower transport inflation will likely lead to an even lower inflation print for December. It is also unlikely that we will see lower rental prices in the next 12 months as many consumers remain under financial pressure. With these being the larger categories of the inflation basket, we do not foresee any sudden increases in Namibian inflation in the short-term.

The Namibian annual inflation rate remained relatively steady at 2.3% y/y in October, following the 2.4% y/y uptick in prices in September. Prices in the overall NCPI basket increased by 0.1% m/m, as inflationary pressure remains muted. On a year-on-year basis, overall prices in six of the twelve basket categories rose at a quicker rate in October than in September, while four categories recorded slower rates of inflation and two categories posted steady inflation. Prices for goods increased by 3.3% y/y while prices for services rose by 0.9% y/y.

As in September, food & non-alcoholic beverages were the largest contributors to annual inflation in October, accounting for 1.3 percentage points of the total 2.3% annual inflation rate. Prices in this category rose 0.7% m/m and 7.1% y/y, the highest level since March 2017. Prices in all thirteen sub-categories recorded increases on a year-on-year basis with the largest increases being observed in the prices of fruits which increased by 16.1% y/y and vegetables which increased by 14.1% y/y. Price increases in meat products and fish also remained elevated at 9.3% y/y and 8.5% y/y respectively. The prospects for the Southern African region to receive normal to above-normal rainfall for the 2020-21 cropping season are currently high as La Niña conditions is expected to be sustained until at least February 2021. Should this materialise, food inflation should slow down.

The alcoholic beverages and tobacco basket item was the second largest contributor to the annual inflation rate in October. The basket item recorded a price increase of 1.4% m/m and 4.3% y/y during the month. Prices for alcoholic beverages increased at a rate of 1.0% m/m and 3.4% y/y, while tobacco prices rose by 3.2% m/m and 8.4% y/y.

The education basket recorded inflation of 7.0% y/y, with the cost of pre-primary education growing at a rate of 5.6%. Primary and secondary education recorded price increases of 9.3% y/y, while tertiary education prices rose by 5.3% y/y. None of the three subcategories printed price increases on a month-on-month basis. The fact that the basket item with the eighth largest weighting (at 3.6% of the CPI basket) is one of the largest contributors of the annual inflation rate is an indication of just how low inflationary pressure is at the moment.

We believe that inflationary pressure will remain relatively contained at around current levels in the short-term. IJG’s inflation model forecasts an average inflation rate of 2.2% y/y in 2020 and 3.4% y/y in 2021. One of the larger risks to our inflation forecast is global oil prices. While there has been an uptick in oil prices in recent weeks, it is improbable that it would return to levels seen at the beginning of the year anytime soon as the global demand for oil remains muted, especially since several European countries are implementing renewed lockdown measures. The likelihood of higher rental prices in the next 12 months also remains low, given the financial pressure many consumers are under. With these being the larger categories of the inflation basket, we do not foresee any sudden increases in Namibian inflation in the short-term.

The Namibian annual inflation rate remained at 2.4% y/y in September, with prices in the overall NCPI basket increasing by 0.3% m/m. On a year-on-year basis, overall prices in six of the twelve basket categories rose at a quicker rate in September than in August, with five categories recording slower rates of inflation and one category recording an increase consistent with the prior month. Prices for goods increased by 3.1% y/y while prices for services rose 1.5% y/y.

The food & non-alcoholic beverages category remained the largest contributor to annual inflation in September, accounting for 1.2 percentage points of the total 2.4% annual inflation rate. The category recorded price increases of 1.2% m/m and 6.6% y/y. Prices in all thirteen sub-categories recorded increases on a year-on-year basis with the largest increases being observed in the prices of fruits which increased by 17.9% y/y and vegetables which increased by 12.2% y/y. Price increases in meat products and fish also remained elevated at 9.4% y/y and 9.0% y/y respectively.

Alcoholic beverages and tobacco prices, making up approximately 12.6 of the overall inflation basket, was the second largest contributor to the annual inflation rate in September, with prices of the basket item increasing by 3.8% y/y. On a month-on-month basis prices of the basket item rose by 0.4% m/m. Prices for alcoholic beverages rose by 0.2% m/m and 3.4% y/y, while tobacco prices increased by 1.2% m/m and 5.6% y/y.

Transport, one of the largest inflation basket categories, continues to experience relatively low inflation at 1.3% y/y. This is largely as a result of low oil prices, which remain down in Rand terms when compared to a year ago. A notable exception however is the 13.4% y/y inflation on public transportation services as a result in the increase in bus and taxi fares due to campaigning by the Namibia Transport and Taxi Union (NTTU) in light of government’s restriction on the number of passengers allowed per vehicle. This highlights just one of the ways in which lockdown measures have increased costs on the public, and often specifically on the more vulnerable members of society.

Global growth remains under pressure and monetary policy remains very accommodative, pointing to low global inflation expectations. Monetary easing by developed markets has reached previously unknown levels and to a large extent enabled developing markets and emerging economies to follow suit, albeit to a lesser extent. The BoN noted in its August Monetary Policy Statement that most developing markets and emerging economies have cut interest rates at their most recent monetary policy meetings, with the notable exception of China which kept rates steady. The inflation environment is expected to remain benign in most markets which should underpin a global economic recovery.

Inflationary pressure in Namibia remains weak and continues to trend below South African inflation. IJG’s inflation model forecasts an average inflation rate of 2.3% y/y in 2020 and 3.7% y/y in 2021. 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. Oil prices and a further escalation of the US-China trade war remain the largest risks 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.