Category Archives: Inflation

The Namibian annual inflation rate slowed to 1.6% in April, from 2.4% y/y in March. This is the lowest annual increase in inflation since June 2005. On a month-on-month basis, prices decreased by 0.3%, following the 0.1% m/m increase in March. Overall, prices in four of the basket categories rose at a faster annual rate than during the preceding, while eight rose at a slower rate. Prices for goods 2.2% y/y in April, while prices for services grew by 0.9%. 

The food & non-alcoholic beverages category displayed price increases of 1.1% m/m and 4.2% y/y in April, making it the largest contributor to annual inflation, accounting for 0.78 percentage points of the 1.6% annual inflation rate. 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, vegetables and coffee, tea and cocoa. 

The miscellaneous goods & services basket item was the second largest contributor to annual inflation, accounting for 0.3 percentage points of the total 1.6% annual inflation figure. The fact that the sixth largest basket item was one of the largest contributors to the annual inflation figure in April illustrates how low inflationary pressure is at the moment. The prices of miscellaneous goods & services rose by 0.3% m/m and 6.0% y/y in April. The only subcategories which showed increases on a month-on-month basis were personal care, which increased by 1.0% m/m, and personal effects, which increased by 0.1% m/m. Prices in all other subcategories remained steady during the month.

The education basket item recorded inflation of 7.0% y/y, with the cost of pre-primary education growing at a rate of 5.6% y/y. Primary and secondary education recorded price increases of 9.3% y/y, while tertiary education prices rose by 5.3%. None of the three subcategories printed price increases on a month-on-month basis.

Zonal data shows that, on a monthly basis, prices declined by 0.4% in the northern and central zones while falling by 0.1% in the mixed east, south and western zone. On an annual basis the Windhoek and surrounding area, in zone 2 recorded the lowest inflation rate at 0.8% y/y in April, with the northern region recording the highest rate of annual inflation at 2.1%. Inflation in zone 3 (Eastern, Southern and Western regions) slowed to 2.2% y/y.

Namibian annual inflation at 1.6% in April shows that inflationary pressure remains extremely subdued, and is currently at levels last seen in 2005. As explained last month, the lockdown imposed by the government severely hampered economic activity in April, putting both businesses and consumers under severe financial pressure which results in consumers simply not being able to afford higher prices on goods and services. While the lockdown has now been mostly lifted, we expect inflation to remain subdued in the short to medium term. IJG’s inflation model forecasts an average inflation rate of 1.9% y/y in 2020 and 3.7% y/y in 2021.

The Namibian annual inflation rate remained relatively unchanged at 2.4% y/y in March, following 2.5% y/y uptick in prices in February. Prices in the overall NCPI basket increased by 0.1% m/m, as inflationary pressures remain muted. On a year-on-year basis, overall prices in four of the twelve basket categories rose at a quicker rate in March, while six 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 1.0% y/y. 

As in February, Transport was the largest contributor to annual inflation in March, accounting for 0.6 percentage points of the total 2.4% annual inflation rate. Transport prices fell by 0.3% m/m, but rose 4.4% y/y in March. The Ministry of Mines and Energy dropped the fuel pump price of diesel by 30 cents per litre in March, which resulted in a price drop of 0.5% m/m in the operation of personal transport equipment sub-category, and the annual increase to slow to 5.5% y/y in March from 5.9% y/y recorded in February. Given that a relatively large fuel pump price cut was announced for both petrol and diesel for April, inflationary pressure is likely to remain very low for this subcategory. Despite OPEC agreeing to cut oil production by 9.7 million barrels in May and June, oil prices are expected to remain low for the next few months as the demand for oil remains low, and oil producers are running out of storage space. The purchase of vehicles subcategory recorded price increases of 4.9% y/y, while the prices of public transport services remained steady.

Prices for the food & non-alcoholic beverages category was the second largest contributor to the annual inflation rate in March. Prices in this category rose by 0.1% m/m and 2.9% y/y. Prices in twelve of the thirteen subcategories recorded increases on an annual basis. The largest increases were observed in the prices of fruits which increased by 16.4% y/y and vegetables which increased by 8.3% y/y. The bread and cereals subcategory recorded price decreases of 0.9% m/m and 0.7% y/y.

The education basket recorded inflation of 7.6% y/y, with the cost of pre-primary education growing at a rate of 5.6% y/y. Primary and secondary education recorded price increases of a rather hefty 23.1% y/y, while tertiary education prices fell by 2.6% 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 declined by 0.1% in the northern zone 1 while rising by 0.1% elsewhere in the country. On an annual basis the Windhoek and surrounding area, in zone 2, recorded the lowest inflation rate at 1.9% y/y in March, with the northern region recording the highest rate of annual inflation at 2.6% y/y. Inflation in zone 3 (Eastern, Southern and Western regions) remained unchanged at 2.5% y/y.

Namibian annual inflation remained muted in March at 2.4% compared to 2.5% in February. We expect this to remain the case for the rest of the year. Oil prices are expected to remain low for as long as factories across the world remain closed. The lockdown imposed by the Namibian government has put a number of businesses and consumers under severe financial pressure, which will result in consumers simply not being able to afford higher prices on goods and services. This will put further downward pressure on inflation as consumers will mostly direct their spending toward essential goods and services. IJG’s inflation model forecasts an average inflation rate of 2.6% y/y in 2020 and 4.3% y/y in 2021.

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.