Category Archives: Inflation

The Namibian annual inflation rate ticked up slightly to 2.5% y/y in February, following the 2.1% y/y increase in prices recorded in January. Prices in the overall NCPI basket increased by 0.3% m/m. Overall, prices in eight of the twelve basket categories rose at a faster annual rate than in January, while four categories rose at a slower annual rate. Prices for goods increased by 3.5% y/y and 1.1% y/y.

Transport, the third largest basket item by weighting, was once again the largest contributor to annual inflation, accounting for 0.6 percentage points of the total 2.5% annual inflation rate. The basket category recorded price increases of 0.2% m/m and 4.4% y/y. The purchase of vehicles subcategory saw price increases of 3.8% y/y, while the operation of personal transport equipment subcategory recorded price increases of 5.9% y/y.

The price of Brent crude has plummeted this week after Saudi Arabia and Russia triggered an oil production war, combined with fears of the global economic impact of the fast-spreading coronavirus. The price of Brent crude fell 28.0% to US$33.0 per barrel this week as both the Saudis and Russians have committed to flood the market with record amounts of oil, we expect the oil price to remain low for the next few months. We thus expect the Ministry of Mines and Energy to cut fuel prices over the next few months, which will lead to lower transport inflation in the coming months.

Food & non-alcoholic beverages prices increased by 1.0% m/m and 2.8% y/y in February, ticking op from inflation of 2.2% y/y recorded in January. Despite this relatively subdued rate of inflation, this basket category made up the second largest portion of annual inflation. Prices in all thirteen of the sub-categories recorded increases on an annual basis. The largest increases were observed in the prices of fruits which increased by 15.0% y/y and fish which increased by 8.2% y/y. We expect muted inflation in this category after most parts of the country received good rainfall during February which is likely to have a positive impact on local food production.

Alcoholic beverages and tobacco prices, was the third largest contributor to the annual inflation rate in February, with prices in the basket increasing by 0.4% m/m and 2.7% y/y. Tobacco prices recorded an increase of 0.4% m/m, but a decrease of 4.4% y/y, while prices for alcoholic beverages recorded an increase of 0.4% m/m and 4.4% y/y.

The zonal data shows that on a monthly basis, prices declined by 0.1% in the northern zone 1 while rising elsewhere in the country. On an annual basis the Windhoek and surrounding area, in zone 2, recorded the lowest inflation rate at 2.1% y/y in July, with the northern region recording the highest rate of annual inflation at 2.8% y/y. Inflation in zone 3 (Eastern, Southern and Western Regions) remained unchanged at 2.5% y/y.

While the Namibian annual inflation print for February at 2.5% has ticked up from the 2.1% figure recorded in January, inflation remains at historically low levels. With low inflationary pressure due to adequate rainfall in most parts of the country, an oil-price war and a lack of domestic demand, we expect inflation to remain subdued in the coming months. IJG’s inflation model forecasts an average inflation rate of 2.8% y/y in 2020. This lower expected inflation and low economic growth forecasts means that there is still some leeway for both the South African Reserve Bank and the Bank of Namibia to cut repo rates at their next MPC meetings.

The Namibian annual inflation rate slowed considerably to 2.1% in January, following the 2.6% y/y increase in prices recorded in December. Prices in the overall NCPI basket increased 0.6% m/m. On a year-on-year basis, overall prices in four of the twelve basket categories rose at a quicker rate in January than in December, while the other eight recorded slower rates of inflation. Prices for goods increased by 2.6% y/y while prices for services increased by 1.3% y/y.

Transport, the third largest basket item, was the largest contributor to annual inflation, accounting for 0.7 percentage points of the total 2.1% annual inflation rate. Transport costs increased by 0.2% m/m and 5.0% y/y. The purchase of vehicles subcategory saw price increases of 4.6% y/y, while the operation of personal transport equipment subcategory recorded price increases of 6.1% y/y. Fears of the global economic impact of the coronavirus has pushed the price of Brent crude oil down 11.9% in January to around US$58 a barrel. Although it is unlikely for the oil price to remain at current levels in the long run, the lower oil price does at least mean that the likelihood for transport inflation to increase substantially in the short term is low.

Food & non-alcoholic beverages, the second largest basket item in weighting, accounted for 0.4 percentage points of the total inflation figure. Food and non-alcoholic beverage prices increased by 2.1% y/y, ticking up from inflation of 1.7% 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 13.8% y/y and vegetables which increased by 8.4% y/y. The meat sub-category meanwhile saw a marginal price decrease of 0.5% y/y in January. Rainfall figures have so far been mixed, with the northern and eastern regions receiving normal- to above-normal amounts of rain, and the central and southern regions receiving below-normal amounts of rain. Should these regions continue to experience poor rainfall for the rest of the rainy season, local food production will be affected which could lead to higher food price inflation.

Alcoholic beverages and tobacco prices, making up approximately 12.6% of the overall inflation basket, was the third highest contributor to the annual inflation rate in January, with prices of the basket item increasing 0.1% m/m and 2.6% y/y. The main driver in this basket category was alcohol prices which increased by 4.4% y/y while tobacco prices were down 5.1% y/y.

According to the zonal data, the northern regions of the country recorded the highest rate of inflation in January at 1.2% m/m and 2.6% y/y. The central region recorded the lowest inflation rate at 0.2% m/m and 1.0% y/y, while the mixed zone 3 covering the south, east and west of the country recorded inflation of 0.5% m/m and 2.5% y/y.

As the graph above depicts, Namibian annual inflation has been slowing almost consistently since November 2018, and is currently trending at levels last seen in 2005. January’s figure of 2.1% y/y is particularly low as a result of annual rental adjustments being put through. According to the NSA, the prices for the rental payments for dwellings sub-category declined by 1.5% y/y in January. As the tough economic conditions persist, it is ever more difficult for landlords to push up rental prices. As rental payments make up a large portion of the CPI basket, the deflationary adjustment means that Namibian annual inflation in 2020 is likely to be well below Namibia’s long run average. IJG’s inflation model forecasts an average inflation rate of 3.3% y/y in 2020. Lower expected inflation, coupled with low economic growth forecasts means that there is a lot of leeway for the Bank of Namibia’s MPC to cut the repo rate at its February meeting.

The Namibian annual inflation rate increased marginally to 2.6% in December, following the 2.5% y/y increase in prices recorded in December. Prices in the overall NCPI basket decreased by 0.1% m/m. The annual average inflation rate for 2019 was 3.7%, compare to 4.3% in 2018 and 6.2% in 2017. On a year-on-year basis, overall prices in seven of the twelve basket categories rose at a quicker rate in December than in November, with three categories recording slower rates of inflation and two categories recorded increases consistent with the prior month. Prices for goods increased by 2.0% y/y while prices for services increased by 3.4% y/y.

In December the housing and utilities category was once again the largest contributor to annual inflation due to its large weighting in the basket, accounting for 0.5 percentage points of the total 2.6% annual inflation rate. Price inflation for this category came in at 1.9% y/y for a third consecutive month and remained relatively flat month-on-month. Prices in the electricity, gas and other fuels subcategory remained flat m/m, but declined by 0.8% y/y. The regular maintenance and repair of dwellings subcategory registered an increase in prices of 5.0% y/y. Month-on-month, prices in this subcategory fell by 0.7%. Annual inflation for rental payments remained unchanged at 2.3% y/y in December.

The education basket recorded inflation of 12.0% y/y, with the cost of pre-primary and primary education growing at a rate of 12.6% y/y, while secondary- and tertiary education recorded price increases of 11.0% y/y and 12.7% y/y, respectively. All three subcategories printed no price increases on a month-on-month basis.

The alcohol and tobacco category displayed a decrease of 0.1% m/m, but an increase of 3.2% y/y. The main driver in this basket category was alcohol prices which increased by 4.9% y/y while tobacco prices were down 4.3% y/y.  A 7.8% m/m decrease in tobacco prices, recorded in May, is the cause for annual decrease in tobacco prices. The Namibia Statistics Agency (NSA) has not provided any explanation for this decrease in any of its bulletins since May.

The zonal data shows that prices fell by 0.3% m/m in the northern regions, and by 0.1% m/m in the east, south and western regions, while rising by 0.1% m/m in the central region. On an annual basis, the Central region recorded the lowest inflation rate at 2.2% in December, with the mixed zone 3 covering the south, east and west of the country recording the highest rate of inflation at 3.3%. Inflation in the northern region of the country increased to 2.5% y/y.

The Namibian annual inflation rate of 2.6% for December continues to trend lower than that of neighbouring South Africa’s November inflation figure of 3.6%. Inflationary pressure in Namibia has been particularly low in the second half of 2019 due to a lack of demand for both goods and services. IJG’s inflation model forecasts an average inflation rate of 3.5% y/y in 2020. The largest upside risk to this forecast is higher food costs and fuel prices. Although the northern and central regions received an encouraging amount of rainfall in December, large parts of the southern region are yet to receive their first rains. Food prices will likely increase if the country experiences another year of below average rainfall.

Geopolitical tension between the US and Iran seems to have calmed down (for the moment at least) and the price of Brent Crude oil has ‘normalised’ at US$64 at the time of writing after spiking to US$71 last week. However, peace in the middle east is all-but-certain and the situation can escalate within the wink of an eye, which will send the price of oil up again. Another potential risk for the oil price is if OPEC goes ahead with the implementation of its plan to cut production by 500,000 barrels per day. Such shocks in the oil price will result in the Ministry of Mines and Energy increasing fuel pump prices for Namibians which will translate into higher transport inflation.