Category Archives: Inflation

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.

The Namibian annual inflation rate ticked up slightly to 2.4% y/y in August, following the 2.1% y/y increase in prices recorded in July. Prices in the overall NCPI basket increased by 0.4% m/m. On a year-on-year basis, overall prices in four of the twelve basket categories rose at a quicker rate in August than in July, with six categories recording slower rates of inflation and two categories recording increases 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 was the largest contributor to annual inflation in August, 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 6.8% y/y. Prices in all thirteen sub-categories recorded increases on a year-on-year basis. The largest increases were observed in the prices of fruits which increased by 18.1% y/y and vegetables which increased by 12.3% y/y. The prices of meat products recorded a somewhat slower increase in prices at 9.9% y/y after seven consecutive months of faster increases on an annual basis. The rate of increase for this sub-category remains relatively elevated compared to average inflation of 2.8% over the last 12 months. On a monthly basis, the bread and cereals category recorded the highest inflation at 2.0% m/m, followed by fish which recorded an increase of 1.7% m/m.

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 August, with prices of the basket item increasing by 3.6% y/y. On a month-on-month basis prices of the basket item fell by 0.7% m/m. Prices for alcoholic beverages fell by 0.8% m/m, but rose 3.4% y/y, while tobacco prices increased by 0.3% m/m and 4.7% 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 NSA’s regional CPI data shows that on a monthly basis prices increased by 0.5% in the northern zone 1, 0.4% in the central zone and 0.3% in the mixed eastern, southern and western zone. On an annual basis the Windhoek and surrounding area, in zone 2, recorded the highest inflation rate at 2.9% y/y in August, with the mixed zone 3 recording the lowest rate of annual inflation at 1.5% y/y. Inflation in the northern region ticked up to 2.5% y/y.

As expected, the Namibian inflation rate recorded a slight uptick to 2.4% y/y in August. Inflationary pressure thus remains weak and continues to trend below South African inflation. The main driver of inflation in the last couple of months has been food inflation which has been averaging 4.3% y/y since the beginning of the year. The increase in fuel pump prices in August had a rather muted effect on overall inflation as fuel prices still remain lower than at the same time last year. 

IJG’s inflation model forecasts an average inflation rate of 2.3% y/y in 2020 and 3.8% y/y in 2021. The biggest risk to our inflation forecast is global oil prices, although a large increase in prices seems unlikely at this point seeing that OPEC had again revised its forecast for global oil demand down by another 400,000 barrels per day to 90.2 million barrels per day. We do not expect landlords to push up rental prices any time soon either as many consumers will not be able to afford it and landlords will want to keep vacancies to a minimum. With these being the larger categories of the inflation basket, we thus do not foresee any sudden increases in Namibian inflation in the short-term.