Category Archives: Inflation

The Namibian annual inflation rate remained at 5.2% y/y in November, unchanged from October. Prices increased by 0.3% m/m. Prices for food and non-alcoholic beverages, which has largely been the reason for the slowdown in annual inflation, continue to increase at slower pace. On a year on year basis, overall prices in three of the twelve basket categories rose at a quicker rate in November than in October, with five categories recording slower rates of inflation and four categories remained unchanged. Prices for goods increased by 3.1% y/y while prices for services increased by 8.0% y/y. This was also unchanged from the increases recorded in October.

Housing and utilities was the largest contributor to annual inflation by weighting, this is also the largest weighted basket item. This category remained flat m/m and increased 8.6% y/y, contributing 2.4% towards the annual inflation figure. Year-on-year price increases within the subcategories showed little change from those recorded in October, with one of the exceptions being price increases for electricity and other fuels of 4.6% y/y in November, up from 4.1% y/y in October. This follows fuel pump price increases in November of 40 cents per litre of petrol and 60c per litre of diesel. Prices for regular maintenance and repair of dwellings contracted by 0.1% m/m.

Transport contributes about 14% towards annual inflation, and as serves as the third largest basket item by weighting. Transport accounted for 0.8% of annual inflation in November, making it the second largest contributor this month. Prices for transport rose by 6.1% y/y, a faster increase in prices than the 4.1% y/y rise recorded in October. Prices related to the purchases of vehicles rose by 7.5% y/y in November compared to a 6.5% y/y increase in October.

The alcoholic beverages and tobacco category showed increases of 5.4% y/y and 0.3% m/m, compared to increases of 5.7% y/y and 1% m/m in October. Tobacco prices increased by 6.0% y/y, while alcohol increased at 5.3% y/y.

Namibian annual inflation, although higher than that of South Africa, has been slowing since the start of this year. South African inflation has, since April this year, remained within the SARB’s target band at 4.6% y/y in November following 4.8% y/y in October. The SARB, being an inflation targeting central bank, kept rates unchanged at its November MPC meeting whilst pointing out that there are upside risks to their inflation forecast. The SARB cited higher international oil prices and a weaker rand exchange rate as reasons not to cut rates, while expecting inflation to remain within the target range in the near term. The outcomes of the ANC electoral conference and Moody’s review decision later in 2018 could have a significant impact on the rand. Adverse outcomes from these two events will most likely trigger capital outflows. Weak economic growth locally as well as regionally, and a slowdown in inflation, provided plenty of cause to expect rate cuts in 2017. This was not to be and the year will end with only one rate cut of 25 basis points exercised in July and August by the SARB and BoN respectively. At present South Africa looks set to enter 2018 with expectations of interest rate hikes which will be emulated by BoN should they transpire.

Annual inflation has slowed to 5.2% y/y in October, following a rise in prices of 5.6% y/y in September. Slower increases in the prices of food and non-alcoholic beverages, in addition to contracting prices for clothing and footwear contributed towards annual inflation rising at a slower rate in October. On a year on year basis, prices in three of the twelve basket categories rose at a quicker rate in October than in September, with six categories recorded lower rates of inflation, while the rate of inflation in three categories remained unchanged. Prices for goods rose by 3.1% y/y while prices for services increased by 8.0% y/y.

Housing and utilities, the largest contributor to annual inflation by weighting, recorded an increase in inflation of 8.6% y/y and a decline 0.1% m/m in October. The electricity and other fuels subcategory recorded an increase in prices of 4.1% y/y, which is a slower rate of increase compared to 6.0% registered the previous month. On a m/m basis prices in this subcategory contracted by 0.4%. Consumers were spared a fuel price increase during October and we expect prices to come under pressure following a fuel pump price increase in November and December at 40 cents and 50 cents respectively.

Food and non-alcoholic beverages contributed about 17% towards annual inflation. One of the major reasons for the slowdown in inflation this year has been the continued moderation in food inflation. Prices in this category rose by 3.7% y/y, lower than the 4.2% recorded in September. Prices for bread and cereals contracted by 2.7% y/y while prices for fish and meat rose by 15.2% and 9.2% respectively.

Alcoholic beverages and tobacco, the third largest category, saw prices increase 5.7% y/y compared to an increase of 6.0% in October of 2016. Prices of alcoholic beverages rose 5.5% y/y while tobacco prices accelerated by 6.4% y/y. Transport prices rose by 4.4% y/y and 0.6% m/m. Prices related to the purchases of vehicles rose by 6.5% y/y in October compared to 3.9% y/y increase in September.

South African inflation rose 4.8% in October following a 5.1% increase in September. The SARB kept its benchmark rate unchanged at 6.75%, having cut rates for the first time in five years in July this year. Escalating uncertainties in the economy as well as potential upside risks to inflation were cited as reasons to the latest decision to keep rates unchanged. Though annual inflation remains within the SARB’s target band, concerns remain that the rand was sensitive to political developments and weak economic growth prospects. The ratings downgrade of South Africa’s local currency to “junk” from S&P Global Ratings sent the rand tumbling. This was however offset by Moody’s decision to place South Africa on review. A ratings downgrade from Moody’s will effectively push South Africa out of major global bond indices, resulting into large capital outflows that will have significant bearing on inflation. Namibia’s foreign currency rating was recently cut to “junk” by Fitch ratings on the back of a mid-year budget review that was tainted by expenditure over-runs, disappointing revenues and escalating debt to GDP levels. Future debt issuance will most likely become more expensive as a result, especially in international capital markets. Though inflation has been

Annual inflation ticked up in September following a two-month consecutive rise in prices of 5.4% y/y. Inflation increased to 5.6% y/y in September, with an increase in fuel pump prices put through early in the month contributing towards the uptick. On a year on year basis, prices in five of the twelve basket categories rose at a quicker rate in September than in August, somewhat offset by lower rates of inflation in five categories, while the rate of inflation in two categories remained unchanged. Prices for goods rose by 3.6% y/y while prices for services increased by 8.4% y/y.

Due to its large weighting in the basket, housing and utilities is the largest contributor to annual inflation. Annual inflation for this category increased by 8.9% y/y and 0.6% m/m. Annual inflation for rental payments remained unchanged at 9.6% in September and will likely remain this high for the rest of the year. The electricity and other fuels subcategory recorded to largest monthly move in prices in September. On an annual basis, prices in the electricity and other fuels subcategory rose 6% compared to 1.8% in August. The low annual inflation rate for this subcategory stemmed from a decrease in prices of gas products, paraffin, methylated spirits, charcoal and wood. Early in the month of September, a 30 cents per litre increase in the price of petrol and diesel was put in effect that contributed significantly towards the uptick in inflation for this subcategory.

The second largest contributor to annual inflation is food and non-alcoholic beverages. This basket item has been one of the major factors contributing to moderating inflation this year. Following the alleviation of the drought, food inflation continues to moderate towards the end of 2017. Prices in this category rose by 4.2% y/y, down from the 4.6% recorded in August. Fish prices are rising faster than any other within this category, rising by 18.2% y/y and 7.6% m/m in September, while prices for bread and cereals contracted by 2.4% y/y, and meat prices increased by 9.4% y/y. Fruit prices fell by 5% m/m.

Alcoholic beverages and tobacco, the third largest category, saw prices increase 5.3% y/y compared to an increase of 5.2% in September of 2016. Prices of alcoholic beverages rose 5.1% y/y while tobacco prices accelerated by 6.0% y/y. Transport prices rose by 3.9% y/y and 0.7% m/m, in line with the decline in vehicle sales for September. Prices related to the purchases of vehicles rose by 3.9% y/y compared to 4.2% recorded in August.

South African inflation was 4.8% in August, up from 4.6% in July. Lower inflation allowed the SARB to cut interest rates in July, and although the August inflation figure was still well within the SARB’s target band, the MPC opted to leave rates unchanged at the September MPC meeting citing long term risks to the inflation outlook. Bank of Namibia aims to ensure price stability through its monetary policy, which is largely achieved by maintaining the currency peg. This ensures that Namibia imports price stability from South Africa. As such, we expect Bank of Namibia to follow suit and leave rates unchanged at 6.75% at its upcoming MPC meeting scheduled for 25 October. However, persistently weak economic growth and moderating inflation does set the stage for further loosening of monetary policy and we are likely to see rates being cut by 25 basis points before the end of the year, should the SARB lead the way.