Category Archives: Inflation

The Namibian annual inflation rate increased marginally to 3.7% y/y in August, following the 3.6% y/y increase in prices recorded in July. On a month-on-month basis, prices rose 0.1% following a 0.2% price change recorded in July. On an annual basis, prices in seven of the twelve basket categories rose at a quicker rate in August than in July, this was offset by slower rates of inflation in three categories, while the rate of inflation in two categories remained unchanged. Prices for goods rose by 3.2% y/y while prices for services increased by 4.4% y/y.

As in July, Transport was the largest contributor to annual inflation in August, accounting for 0.8% of the total 3.7% inflation figure. Transport prices increased by 0.1% m/m and 6.1% y/y in August, slightly slower than the 0.5% m/m and 6.9% y/y increase recorded in July. Prices in the three subcategories all recorded increases on a year-on-year basis. The public transportation services subcategory registered an increase of 19.9% y/y as a result of the 20% increase in taxi fares that was approved in August 2018. Prices relating to the purchase of vehicles increased at a rate of 3.0% y/y, while prices relating to the operation of personal transport equipment increased by 3.8% y/y.

The ongoing trade dispute between China and the US, coupled with tensions in the Persian Gulf continues to pressure on the price of Brent Crude oil, resulting in a month-on-month decrease of 7.3% to US$60.47 at the end of August. The lower oil price should bode well for a cut in Namibian pump prices in the coming months if oil prices remain around current levels, and if the rand continues appreciating against the US dollar.

Food & non-alcoholic beverages, the second largest basket item in weighting, was the second largest contributor to annual inflation, accounting for 0.7% of the total inflation figure. Food and non-alcoholic beverage prices increased by 4.1% y/y, ticking up from the 3.4% y/y recorded in July. Prices in eleven of the thirteen sub-categories recorded increases on annual basis. The largest increases were observed in the prices of vegetables which increased by 13.9% y/y and fruits which increased by 11.0% y/y. The meat and oils and fats sub-categories saw marginal price decreases of 0.7% y/y and 0.4% y/y, respectively. The decline in meat prices is not expected to last however, as it is largely driven by high supply of animals as farmers slaughter more during the drought. Restocking farms in the future will likely lead to upward pressure on meat prices.

The alcohol and tobacco category displayed an increase of 0.1 m/m and 3.9% y/y in August. The main driver in this basket category remains alcohol prices which prices which increased by 6.0% y/y while tobacco prices were down 5.1% 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 NSA generally reconstitutes the CPI basket every five years, with the last reconstitution done in 2013. The NSA states in its bulletin that it planned to rebase the CPI basket this year based on the 2015/16 Namibia Household Income and Expenditure Survey (NHIES) results. There were however methodological changes in the NHIES 2015/16 and as a result the rebasing could not take place. According to the NSA, the next CPI rebasing will take place after the next NHIES. The NSA notes that that the next CPI rebasing will only be done after the next NHIES has been conducted.

Zonal data shows that on a monthly basis, prices printed flat in the central zone, while rising elsewhere in the country. On an annual basis, the Windhoek and surrounding area, recorded the lowest inflation rate at 3.0% in August, with the mixed zone 3 covering the south, east and west of the country recording the highest rate of inflation at 5.0% y/y. Inflation in the northern region of the country increased to 3.5% y/y.

The Namibian annual inflation rate of 3.7% y/y for August continues to trend lower than that of neighbouring South Africa’s July inflation figure 4.0% y/y for a fourth consecutive month. Low food price inflation and subdued housing and related inflation rates have contributed greatly to the low overall inflation figure in August.

Should the price of oil continue to trend at current levels, coupled with the appreciation of the Namibian Dollar against the US dollar that we have seen in recent weeks, we expect the Ministry of Mines and Energy to cut fuel prices sometime in the coming months, which should ease transport inflation and bring some welcome relief to consumers. IJG’s inflation model forecasts an average inflation rate of 3.9% y/y in 2019. The largest upside risk to this forecast is higher food costs, as the drought affects local food production.

The Namibian annual inflation rate slowed to 3.6% y/y in July, following the 3.9% y/y increase in prices recorded in June. Prices increased by 0.2% m/m, compared to the overall basket price increase of 0.1% m/m in June. Overall, prices in six of the basket categories rose at a faster annual rate than in July, prices in five categories rose at a slower annual rate and one category recorded steady inflation rates. Prices for goods rose by 3.1% y/y while prices for services rose by 4.4%.

Transport accounted for 0.9% of the total 3.6% annual inflation recorded in July, making it the largest contributor to annual inflation for the month. Prices for the transport basket rose 0.5% m/m and 6.9% y/y during the month. The purchase of vehicles subcategory saw price increases of 0.6% m/m and 3.6% y/y in July, while the operation of transport equipment subcategory recorded price increases of 0.7% m/m and 4.9% y/y. Although global oil prices have declined in the last few months, the Ministry of Mines and Energy decided to keep fuel pump prices unchanged for July in order to strengthen its financial capacity to subsidise possible under-recoveries in future.

The Housing and utilities category, the largest weighting in the CPI basket, was the second largest contributor to annual inflation, accounting for 0.6% of the 3.6% annual inflation rate. Housing and utility costs increased by 1.0% m/m and 2.2% y/y. The upward movement on a month-on-month basis resulted from an increase in prices for the electricity, gas and other fuels sub-component. Prices of this subcategory rose 5.6% m/m and 1.6% y/y. Water supply, sewage service and refuse collection recorded an increase of 2.2% m/m as a result of the 5% increase in water tariffs effective from 1 July 2019, announced by the City of Windhoek.

Food & non-alcoholic beverages, the second largest basket item by weighting, was the third largest contributor to annual inflation, accounting for 0.6% of the 3.6% annual inflation rate. Prices in this category decreased by 0.6% m/m, but increased by 3.4% y/y. Prices in nine of the thirteen sub-categories recorded increases on annual basis, with the largest increases being observed in the prices of fruits, sugar and confectionaries and vegetables.

Zonal data shows that on a monthly basis prices declined by 0.1% in the central zone 2 while rising elsewhere in the country. On an annual basis the Windhoek and surrounding area, in zone 2, recorded the lowest inflation rate at 3.0% in July, with the mixed zone 3 covering the south, east and west of the country recording the highest rate of inflation at 5.1% y/y. Inflation in zone 1 (Northern region) moderated to 3.2% y/y.

The Namibian annual inflation rate of 3.6% y/y continues trending lower than neighbouring South Africa’s June figure of 4.5%. As the Namibian economy is projected to remain weak in 2019, coupled with slowing inflation since the beginning of the year, the Bank of Namibia (BoN) has this week taken the decision to cut the repo rate by 25 basis points to 6.50%. IJG’s inflation model forecasts an average inflation of 3.8% y/y in 2019. The largest upside risk to this forecast is higher transport and food costs.

The Namibian annual inflation rate moderated to 3.9% y/y in June, following the 4.1% y/y increase in prices recorded in May. Prices increased by 0.1% m/m, compared to the overall basket price decrease of 0.1% m/m in May. Overall, prices in four of the basket categories rose at a faster annual rate than in May, prices in five categories rose at a slower annual rate and three categories recorded steady inflation rates. Prices for goods rose by 3.4% y/y in June, while prices for services rose by 4.7%.

Transport accounted for 1.0 of the total 3.9% annual inflation recorded in June, making it the largest contributor to annual inflation for the month. Prices in the transport basket rose 1.1% m/m and 7.0% y/y. The purchase of vehicles subcategory saw price decreases of 0.5% m/m and 3.6% y/y. The operation transport equipment subcategory recorded price increases of 2.0% m/m and 5.0% y/y. The Ministry of Mines and Energy announced an increase in fuel pump prices of 30 c/l on all controlled products at the beginning of June.

In order to stabilise fuel prices, the Ministry decided not to pass on over-recoveries to the consumer, and kept pump prices unchanged. Brent Crude oil prices increased by 3.2% during June, reaching US$66.55 per barrel at the end of the month and the National Energy Fund saw it prudent to strengthen its financial position given the potential risks of further increases in the Brent Crude prices, citing political tension between USA and Iran specifically.

Alcohol and tobacco prices were flat on a month-on-month basis, but increased 5.5% y/y. The upward movement year-on-year resulted from increases in prices for the alcoholic beverages sub-component. Prices of alcoholic beverages, decreased by 0.2% m/m but increased by 7.9% y/y. However, tobacco prices recorded an increase of 0.8% m/m but decreased by 4.7% y/y.

Food & non-alcoholic beverages, the second largest basket item by weighting, was the second largest contributor to annual inflation, accounting for 0.7 of the 3.9% annual inflation rate. Prices in this category decreased by 0.4% m/m but rose by 3.9% y/y. Prices in ten of the thirteen sub-categories recorded increases on annual basis, with the largest increases being observed in the prices of bread and cereals, and fruits and vegetables.

The increase on an annual basis is likely of the second-round effects of increased transport prices which has filtered through to food prices, coupled with poor rainfall during Namibia’s rainy season that affects local food production.

Zonal data shows that on a monthly basis prices were flat in the central zone 2 while rising elsewhere in the country. On an annual basis the northern regions, in zone 1, recorded the lowest inflation rate at 3.5%, with the mixed zone 3 covering the south, east and west of the country recording the highest rate of inflation at 4.9%. Inflation in zone 2 (Windhoek and surrounding) moderated to 3.7% y/y.

The Namibian annual inflation rate of 3.9% y/y for June is lower than that of neighbouring South Africa’s 4.5% y/y for May. South Africa is yet to announce the June inflation rate, but thus far inflation outcome has been within the 3-6% inflation target. Due to a deteriorating growth outlook for South Africa, as well as the SARB’s latest inflation forecasts, we expect the SARB’s MPC to announce a 25bp rate cute later this week. We believe that the more dovish outlook by central banks in advanced economies gives the SARB enough room to cut rates, with the Bank of Namibia likely to follow suit at its next MPC meeting in August.  IJG’s inflation model forecasts an average inflation of 3.9% y/y in 2019. The largest upside risk to this forecast, is higher transport and food costs and the upper band of 4.3% currently looks more likely.