Category Archives: Inflation

The Namibian annual inflation rate ticked up to 3.8% in May, following the 3.6% y/y increase in prices recorded in April. On a month-on-month basis, prices increased 0.4%. On a year-on-year basis, overall prices in six of the basket categories rose at a quicker rate in May than in April, with four categories recording slower rates of inflation and two categories remained unchanged. Prices for goods increased by 3.6% y/y while prices for services increased by 4.2% y/y.

Due to its large weighting in the basket, housing and utilities remains the largest contributor to annual inflation. Annual inflation for this category increased by 3.3% y/y and 0.3% m/m. The regular maintenance and repair of dwellings subcategory recorded an increase in prices of 2.6% y/y, which is a slower rate of increase than the 3.2% y/y registered the previous month. On a monthly basis, prices in this subcategory increased slightly by 0.7%. Prices in the electricity, gas and other fuels subcategory increased by 1.7% m/m and 5.5% y/y. The rest of the subcategories remained unchanged month-on-month and showed slightly slower price increases year-on-year.

Transport was the second largest contributor to annual inflation, accounting for 0.7% of the total 3.8% annual inflation figure. Prices for transport rose by 5.6% y/y in May, marginally slower than the increase of 5.8% y/y recorded in April. Prices related to the purchases of vehicles increased by 6.6% y/y in May compared to the 7.3% y/y increase recorded in the preceding month. The price of oil has retreated form the highs of May as Saudi Arabia and Russia signalled they may increase output later this year to offset potential supply losses from Iran and Venezuela.

Alcoholic beverages and tobacco, the third largest category, saw slightly faster inflation of 5.4% y/y and 0.7% m/m. Tobacco prices increased by 2.1% y/y, while alcohol prices increased by 6.2% y/y.

Namibian annual inflation at 3.8% y/y continues trending lower than that of South Africa. South Africa’s consumer inflation rate jumped to 4.5% in April after reaching a seven-year low of 3.8% in March. The SARB stated that risks and uncertainties that could possibly affect the inflation rate have shifted to the upside. Furthermore, the weakening rand may push inflation higher, decreasing the likelihood that either the SARB or BoN will cut interest rates again in 2018. BoN yesterday announced that the MPC decided to keep the repo rate unchanged and stated that inflation is expected to average around 4% in 2018.

The Namibian annual inflation rate increased marginally to 3.6% y/y in April, following the 3.5% y/y increase in prices recorded in March. Annual inflation has slowed markedly from the 6.7% recorded during April last year. On a month-on-month basis, prices increased 0.3%. Overall, prices in six of the basket categories rose at a faster annual rate than during the preceding month, four at a slower rate and two grew at a steady pace. Prices for goods rose by 3.1% y/y while prices for services grew by 4.3%.

The largest contributor to annual inflation remains Housing and utilities due to its large weighting in the basket. This category remained flat m/m for a second month and increased 3.4% y/y, contributing 1.0 percentage point towards the annual inflation figure. The regular maintenance and repair of dwellings subcategory recorded an increase in prices of 3.2% y/y, which is a faster rate of increase than the 1.7% y/y registered the previous month. On a month-on-month basis prices in this subcategory increased by 1.3%. The rest of the subcategories remained unchanged month-on-month and showed little change in price increases year-on-year.

Transport, with a weighting of about 14%, serves as the third largest basket category, accounting for 0.8 percentage points of annual inflation in April and making it the second largest contributor this month. Transport costs increased by 0.6% m/m and 5.8% y/y. Prices related to the purchases of vehicles rose by 7.3% y/y in April compared to a 6.9% y/y increase recorded in March. US president Donald Trump’s withdrawal from the Iran nuclear deal has raised concerns last week that the global supply of oil will be squeezed, pushing up the price of Brent Crude by almost 3%.

The alcoholic beverages and tobacco category showed slightly faster inflation of 4.7% y/y and 0.8% m/m. Tobacco prices increased by 0.5% y/y, while alcohol prices increased by 5.7% y/y.

Namibian annual inflation at 3.6% y/y is once again lower than that of South Africa, with South African annual inflation slowing to 3.8% y/y in March, its lowest rate in seven years. SARB Governor Lesetja Kganyago has recently said that this benign inflation environment is not expected to continue as the expectation is that the most recent reading was the low point in the current inflation cycle due to a combination of base effects and tax increases (including VAT and fuel levy increases). The currently favourable inflationary environment has contributed to a sounder macroeconomic environment, and has afforded some room for monetary policy to remain accommodative for now and help foster improved economic growth.

The Namibian annual inflation rate remained at 3.5% y/y in March, unchanged from February, and significantly down from the 7.0% recorded during the same period last year. Prices increased 0.1% m/m. Of the twelve basket items, four saw a higher annual inflation rate than the previous month, two remained unchanged, while six categories saw lower rates of price increases. Prices for goods increased by 2.8% y/y while prices for services grew by 4.4%, similar annual price increases to those seen in February.

Housing and utilities remained the largest contributor to annual inflation due to its large weighting in the basket. This category remained flat m/m and increased 3.3% y/y, contributing 0.9% towards the annual inflation figure. Year-on-year price increases within the subcategories showed little change from those recorded in February, with the exception being price increases for regular maintenance and repair of dwellings which slowed down to 1.7% y/y in March, from the 3.0% y/y in February. From a month on month perspective, prices in this subcategory increased by 0.3%, while electricity, gas and other fuels increased by 0.1% m/m. The rest of the subcategories remained unchanged month on month.

The transport basket category contributes about 14% towards annual inflation, and serves as the third largest basket item by weighting. It accounted for 0.7% of annual inflation in March which makes it the second largest contributor this month. Prices for transport rose by 0.3% m/m and 5.4% y/y. Prices related to the purchases of vehicles rose by 6.9% y/y in March compared to an 8.2% y/y increase in February. The price of crude oil has surged to levels last seen in 2014 as the risk of violent conflict grips the market and raises concerns over potential Middle East supply disruptions.

The alcoholic beverages and tobacco category showed slightly slower increases of 4.3% y/y and 0.3% m/m. Tobacco prices increased by 1.9% y/y, while alcohol prices increased by 4.8% y/y.

Namibian annual inflation at 3.5% y/y continues trending lower than that of South Africa. South Africa’s February inflation was 4.0% y/y, making it the lowest rate since March 2015 and remaining well within SARB’s target range. The SARB, being an inflation targeting central bank, cut interest rates by 25 basis points at its March MPC meeting whilst pointing out that indications are that a low point in the inflation cycle has been reached. SARB Governor Lesetja Kganyago said that the main changes in the inflation forecast relate to the exchange rate and has cautioned that an international trade war could push inflation expectations higher.

The Bank of Namibia announced this week that the MPC has decided to keep the repo rate unchanged at 6.75% due to foreign reserves having dropped by N$4.1 billion in the past three months. According to BoN, foreign reserves stood at N$26.1 billion at 31 March.