Category Archives: Inflation

The Namibian annual inflation rate edged up to 4.0% in June, following a rise in prices of 3.8% y/y recorded in May. Prices increased by 0.2% m/m. Of the twelve basket items, three saw a higher annual inflation rate than in the previous month, three remained unchanged, while six categories saw lower rates of price increases. Prices for goods increased by 3.8% y/y while prices for services increased by 4.2% y/y. The increase in prices for services was unchanged from the increase recorded in May, while goods inflation accelerated on an annual basis.

Transport, the third largest basket item, was the largest contributor to annual inflation, accounting for 1.0% of the total 4.0% annual inflation figure. Prices for transport rose 2.7% m/m and 7.2% y/y in June, up from the 0.9% m/m and 5.6% y/y figures seen in May. Prices related to the operation of personal transport equipment increased by 8.9% y/y in June, compared to the 6.2% y/y increase recorded in the preceding month. The price of both petrol and diesel increased by 60 cents per litre in June, contributing to the jump in the overall category. Price increases related to the purchases of vehicles and prices for public transportation services were relatively unchanged month-on-month and year-on-year.

The price of Brent Crude oil dropped by 6.9% on Wednesday to US$73.40 a barrel, the biggest daily decline in two years. The sell-off followed Libya’s announcement that it would boost supply by reopening four export terminals that had been closed since June. Oil prices have been volatile lately after the US has said that it would reinstate sanctions against Iran, a major producer. Wednesday’s decrease brings some relief as oil price increases has largely overshot expectations in 2018. This relief should filter through to Namibian consumers who have experienced a number of fuel price increases during the year. The decision not to increase fuel prices in July by the Ministry of Mines and Energy means that there are under-recoveries at the pumps at present. While fuel price increases towards the end of the year are expected, Wednesday’s decrease in the oil price may result in lower increases than what would otherwise be expected.

The Housing and utilities category was the second largest contributor to annual inflation, due to its large weighting in the basket. Price inflation for this category came in at 3.2% y/y, but remained relatively unchanged month-on-month. The regular maintenance and repair of dwellings subcategory recorded an increase in prices of 2.3% y/y, which is a somewhat slower rate of increase than the 2.6% y/y registered the previous month. Month-on-month, prices in this subcategory increased by 0.7%. The electricity, gas and other fuels subcategory recorded slower price increases for a third consecutive month at 4.9% y/y in June. The rest of the subcategories remained unchanged on both a monthly and annual basis.

Alcoholic beverages and tobacco, the fourth largest category, saw marginally slower price increases of 5.1% y/y and unchanged prices month-on-month. Prices of alcoholic beverages rose 5.3% y/y while tobacco prices increased by 4.1% y/y. Food inflation decelerated to 3.8% y/y in June from 3.9% y/y in May. Low food inflation, along with low rental price increases recorded in January, greatly contributed to maintaining the inflation rate at well below average levels for Namibia.

Namibian annual inflation at 4.0% has slowly been ticking up since April, and our expectations are that this trend will continue going forward. Most of June’s increase in the annual inflation figure was caused by the increase in the fuel price of 60 cents per litre. Second round effects will influence other basket items such as food in the coming months.

South African annual inflation came in at a surprising 4.4% in May, slowing somewhat from April’s reported 4.5%. The cumulative effects of increases in fuel prices and VAT was expected to push up the inflation figure.  As Namibia imports most of its inflation from South Africa, the fact that inflation remains in the lower half of the SARB’s target band is positive news for Namibian consumers given the current domestic economic challenges.

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.