Category Archives: Inflation

The Namibian annual inflation rate moderated to 5.1% y/y in December, following the 5.6% y/y increase in prices recorded in November. Prices in the overall NCPI basket decreased 0.2% m/m. The annual average inflation rate for 2018 was 4.3%, compared to 6.2% in 2017. On a year-on-year basis, overall prices in five of the twelve basket categories rose at a quicker rate in December than in November, with four categories recording slower rates of inflation and three categories remained unchanged. Prices for goods increased by 5.3% y/y while prices for services increased by 4.9% y/y.

Transport, the third largest basket item, was the largest contributor to annual inflation, accounting for 1.5% of the total 5.1% annual inflation rate. Prices for this basket item decreased by 1.8% m/m, but increased 10.9% y/y in December. Prices in all three sub-categories recorded increases on a year-on-year basis. Prices relating to the purchase of vehicles increased at a rate of 6.8% y/y, while prices related to public transportation services increased by 18.2% y/y due to the increases in taxi and bus fares in September.

The operation of personal transport equipment saw a price decrease of 2.8% m/m but an increase of 10.5% y/y. The month-on-month price decrease for this subcategory is a result of the cut in fuel pump prices announced by the Ministry of Mines and Energy at the beginning of December. The minister cut the price of unleaded and diesel by 100 cents per litre and 40 cents per litre, respectively, due to a decrease in the global oil price.

The price of Brent Crude oil increased by more than 20% in the first half of 2018, and hit a four-year high of US$86.29 per barrel in October. The price of oil has since fallen about 30% due to rising inventories and rapidly rising shale oil production in the US. Although the oil price has recovered somewhat from the beginning of the year, it continues to be weighted down by weaker economic growth forecasts in China.

Food and non-alcoholic beverages accounted for 0.9% of the total annual inflation rate. Food inflation is currently running at 5.2% y/y, up from the 4.7% y/y figure seen in November. The sub-categories of food and non-alcoholic beverages showed relatively low monthly increases, while six of the sub-categories showed monthly decreases. Prices of mineral waters, soft drinks and juices decreased by 1.8% m/m, while the prices of other non-alcoholic beverages declined 1.0% m/m in December. On an annual basis, prices of vegetables and fruits increased 12.8% y/y and 8.1% y/y respectively. Bread and cereal prices rose 7.9% y/y. The slow increase in meat, fish, and soft drink and mineral water prices helped keep food inflation tethered within low- to mid-single-digit levels for the year.

The Housing and utilities category was the third largest contributor to annual inflation due to its large weighting in the basket. Prices for this category remained flat m/m and increased 3.1% y/y. Prices in the electricity, gas and other fuels subcategory increased 4.9% y/y, significantly slower than the inflation of 8.7% recorded in November, due to base effects. The regular maintenance and repair of dwellings subcategory registered an increase in prices of 2.5% y/y although prices decreased by 0.7% m/m. This follows a 0.3% decrease in prices in this category in November.

The moderation in the Namibian annual inflation rate to 5.1% was somewhat expected given the cut in fuel pump prices in December. We expect transport inflation to continue its slower growth rate on an annual basis in the short-term due to the further fuel pump price cut in January, relatively low oil prices, and the stronger exchange rate. The above-mentioned factors hold true for South African inflation too and as such filter into the SARB’s Monetary Policy Committee forecasts and decisions. Relief from lower oil and fuel prices should lead to a slightly more dovish SARB, all else equal, which is likely to lead to interest rates being left unchanged later this week when the SARB MPC meets.

Local food prices might increase going forward if imports of cloven-hoofed animals and their products remain banned for some time due to the outbreak of foot-and-mouth disease in the Limpopo province in South Africa.

The Namibian annual inflation rate accelerated to 5.6% y/y in November, following the 5.1% y/y increase in prices recorded in October. Prices increased by 0.7% m/m, up from the 0.4% increase recorded in October. On an annual basis prices in five of the basket categories rose at a quicker rate in November than in October, three remained unchanged, while four categories saw lower rates of price increases. Prices for goods increased by 6.1% y/y while prices for services increased by 4.8% y/y. The increase in prices for services was unchanged from the increase recorded in October, while goods inflation accelerated on a monthly basis.

Transport, the third largest basket item, was once again the largest contributor to annual inflation, accounting for 1.8% of the total 5.6% annual inflation rate. Transport prices increased by 1.9% m/m and 13.8% y/y in November, up from the 1.2% m/m and 13.6% y/y increases seen in October. Prices in the three sub-categories all recorded increases on a year-on-year basis. Prices related to the operation of personal transport equipment increased by 15.4% y/y in November, compared to the 15.5% y/y increase recorded in the preceding month. The price of petrol increased by 50 cents per litre in November, while the price of diesel went up by 70 cents per litre, contributing to the jump in the overall category. Prices relating to the purchase of vehicles increased at a rate of 6.9% y/y, while prices related to public transportation services increased by 18.2% y/y.

The Ministry of Mines and Energy has since decreased fuel pump prices of unleaded and diesel by 100 cents per litre and 40 cents per litre, respectively. This should provide some relieve to consumers after a series of fuel price increases this year.

The Housing and utilities category was the second largest contributor to annual inflation due to its large weighting in the basket. Prices for this category remained flat m/m for a third month running and increased 3.7% y/y. Prices in the electricity, gas and other fuels subcategory increased 8.7% y/y, slightly slower than inflation of 9.0% recorded in October. The regular maintenance and repair of dwellings subcategory recorded an increase in prices of 3.5% y/y, which is a marginally slower rate of increase than the 3.7% y/y registered in the previous month. Month-on-month, prices of all the subcategories remained relatively unchanged.

Food and non-alcoholic beverages accounted for 0.8% of the total 5.6% annual inflation rate. Prices in this category rose by 4.7% y/y, faster than the 3.0% recorded in October. Prices for vegetables and fruit increased by 8.9% y/y and 7.9% y/y, respectively. Bread and cereal prices rose 6.0% y/y. Prices of food and non-alcoholic beverages accelerated at a faster pace on both monthly and annual basis. The second-round effects caused by the rampant and continuous increases in transport inflation seems to be filtering through to food prices. This is likely to persist in the very near-term, although recent fuel pump price cuts could moderate this slightly.

The Namibian annual inflation rate of 5.6% is currently trending somewhat higher than neighbouring South Africa’s November figure of 5.2%. The Bank of Namibia’s MPC decided to leave the repo rate unchanged at its meeting last week, deviating from the SARB’s decision last month to hike interest rates by 25 basis points. The BoN stated that the recent declines in fuel prices suggest that the risk of further upward pressure on inflation from this source has been reduced considerably. The BoN further mentioned that at the current level, the stock of international reserves is sufficient to protect the currency peg of the Namibian Dollar to the Rand.

As mentioned in our October 2018 PSCE review, our expectations are for interest rates to remain accommodative in the near-term. However, the BoN will be mindful of possible increases in SA rates and move to adjust local rates accordingly. Higher interest rates in SA will very likely lead to capital outflows from Namibia, which in turn jeopardises foreign reserve levels, and therefore the currency peg.

The Namibian annual inflation rate edged up to 5.1% y/y in October, up from 4.8% y/y in September. Prices in the overall NCPI basket increased 0.4% m/m in October. On an annual basis, prices in six of the twelve basket categories rose at a quicker rate in October than in the previous month, while three categories recorded slower rates of inflation and three categories remained unchanged. Prices for goods increased by 5.3% y/y while prices for services increased by 4.8% y/y.

Transport, the third largest basket item, was the largest contributor to annual inflation, accounting for 1.8% of the total 5.1% annual inflation figure. Transport prices increased by 1.2% m/m in October, which is slower than the 3.7% m/m increase recorded in September. However, on an annual basis, the 13.6% y/y increase in transport prices is faster than the 12.9% y/y growth recorded in September due to base effects. Prices in the three sub-categories all recorded increases on a year-on-year basis. Prices relating to the purchase of vehicles increased at a rate of 6.0% y/y, while prices relating to the operation of personal transport equipment increased by 15.5% y/y. Prices related to public transportation services increased by 18.0% y/y. The increase in oil prices for most of the year has been the driver of the increases in this basket category.

The Ministry of Mines and Energy increased fuel prices by 50c per litre in October. The minister stated that the exchange rate between the Namibian Dollar and the US Dollar (against which oil is priced) and the international oil price were the major factors contributing to the increase. The Ministry have announced further increases in November of 50c per litre and 70c per litre for Unleaded Petrol and Diesel, respectively, meaning that further pressure will be exerted on the transport price inflation. Oil prices peaked in October in Namibia dollar terms and have since declined by over 35% which may bring some relief in fuel prices in the coming months.

The Housing and utilities category was the second largest contributor to annual inflation due to its large weighting in the basket. Prices for this category remained flat m/m for a second month and increased 3.8% y/y. Prices in the electricity, gas and other fuels subcategory increased at 9.5% y/y, faster than inflation of 9.0% y/y recorded in September. The regular maintenance and repair of dwellings subcategory recorded an increase in prices of 3.7% y/y, which is a marginally faster rate of increase than the 3.4% y/y registered the previous month. Month-on-month, prices of all the subcategories remained unchanged.

Alcoholic beverages and tobacco, the fourth largest category, saw marginally slower price increases of 4.9% y/y and 0.3% m/m. Prices of alcoholic beverages rose 5.3% y/y while tobacco prices increased by 3.2% y/y.