Category Archives: Inflation

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.

The Namibian annual inflation rate remained unchanged at 2.1% y/y for a third consecutive month. Prices increased by 0.2% m/m, as inflationary pressures remain muted. On an annual basis, prices in three of the twelve basket categories rose at a quicker rate in July than in June. Two categories remained unchanged, while the rate of price increases in seven categories slowed for the month of July. Prices for goods rose by 2.4%, while prices for services increased by 1.6%.

Food & non-alcoholic beverages, the second largest basket item by weighting, continued to be the largest contributor to annual inflation, accounting for 1.1 percentage points of the total 2.1% inflation rate. Prices in this category increased by 0.7% m/m and 6.1% 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 fruit which increased by 14.7% y/y and vegetables which increased by 14.0% y/y. The prices of meat products recorded a faster increase in prices for seven consecutive months on an annual basis, increasing by 10.6% y/y in July.

The alcoholic beverages and tobacco basket item was the second largest contributor to the annual inflation rate in July, with prices of the basket item increasing by 0.8% m/m and 4.5% y/y. Prices for alcoholic beverages increased at a rate of 0.8% m/m and 4.4% y/y, while tobacco prices rose by 0.7% m/m and 4.6% 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.

Zonal data shows that on a monthly basis prices increased by 0.2% in the northern zone 1, 0.3% in the central zone and remained steady in the mixed eastern, southern and western zone. On an annual basis, Windhoek and surrounding area, in zone 2, recorded the highest inflation rate at 2.5%, with the mixed zone 3 recording the lowest rate of annual inflation at 1.4%. Inflation in zone 2 (the northern region) slowed to 2.1% y/y.

We expect the Namibian inflation rate to have more or less troughed in the last couple of months. Despite inflationary pressure generally remaining very muted, we do expect a bit of an uptick in Namibian inflation in August after an increase in global oil prices led the Ministry of Mines and Energy to increase the prices of petrol and diesel by 100 cents per litre and 70 cents per litre, respectively, in the beginning of the month. We could see further increases in fuel prices during the rest of the year, depending on the recovery in global oil demand and the exchange rate. Despite the expected acceleration in Namibian inflation, we believe that inflationary pressure will remain relatively contained and that there will be enough room for the Bank of Namibia to cut interest rates further, by between 25-50 basis points at its August monetary policy meeting. IJG’s inflation model forecasts an average inflation rate of 2.1% y/y in 2020 and 3.5% in 2021.

The Namibian annual inflation rate remained at 2.1% in June, unchanged from May. On a month-on-month basis, prices increased by 0.2%, following the 0.4% m/m increase in May. Overall, prices in five of the twelve basket categories rose at a faster annual rate than during the preceding month, four at a slower rate and three grew at a steady pace. Price for goods rose by 2.5% y/y in June, while prices for services grew by 1.6% y/y.

The food & non-alcoholic beverages category displayed prices decreases of 0.3% m/m, but an increase of 4.7% y/y in June, making it the largest contributor to annual inflation, accounting for 0.84 percentage points of the total 2.1% annual inflation rate.  Prices in twelve of the thirteen sub-categories recorded increases on a year-on-year basis. The largest increases were observed in the prices of fruit which increased by 21.2% y/y and vegetables which increased by 11.7% y/y. The price of bread and cereals saw price decreases of 0.9% y/y.

The alcoholic beverages and tobacco basket item was the second largest contributor to the annual inflation rate in June, with prices of the basket item increasing by 1.4% m/m and 3.6% y/y. Prices for tobacco products decreased by 0.3% m/m, but increased 3.9% y/y. The prices of alcoholic beverages meanwhile rose by 1.8% m/m and 3.6% y/y.

The miscellaneous goods & services basket recorded inflation of 0.1% m/m and 6.3% y/y, and contributed 0.32 percentage points to the overall annual inflation figure. Only two subcategories showed price increases on a month-on-month basis, with personal effects increasing by 0.4% m/m and personal care rising by 0.2%. Prices in all the subcategories remained steady during the month.

The NSA’s regional CPI data shows that on a monthly basis prices increased by 0.2% in the northern zone 1, 0.2% in the central zone, and 0.1% in the mixed eastern, southern and western zone. On an annual basis the northern region recorded the highest inflation rate at 2.3% y/y in June, followed by the central zone at 2.1% y/y and the mixed zone 3 at 1.8% y/y.

Namibian annual inflation at 2.1% in June remains benign as economic activity remains weak after the relaxation of the lockdown restrictions, and is on par with South Africa’s May inflation figure of 2.1% y/y. South Africa’s inflation has breached the lower end of the SARB’s 3-6% target range in April, and remained at or below the 4.5% midpoint for 18 consecutive months. If the SARB expects inflation to trend at current levels for some time, it could decide to cut interest rates further. The market currently expects the SARB to cut rates by 25-50 basis points at its July MPC meeting next week, although a 25-basis point cut is more likely in IJG’s view. Regardless of the outcome, we expect the BoN to follow the SARB’s at its August MPC meeting, as Namibian inflation will likely remain muted for at least the rest of the year. IJG’s inflation model forecasts an average inflation rate of 2.2% y/y 2020 and 3.8% in 2021. The biggest risk to this forecast is fuel price increase due to the steady increase in the international oil price.