Category Archives: Inflation

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.

The Namibian annual inflation rate decreased slightly to 3.5% y/y in February following the 3.6% y/y increase in prices recorded in January. Prices increased by 0.1% m/m. On a year on year basis, overall prices in four of the twelve basket categories rose at a quicker rate in February, while five categories recorded slower rates of inflation and three categories remained unchanged. Prices for goods increased by 2.9% y/y while prices for services increased by 4.4% y/y, with both rates unchanged from January.

The largest contributor to annual inflation remains housing and utilities due to its large weighting in the basket. The category posted inflation of 3.2% y/y, which is marginally lower than the 3.6% y/y increase in prices in January. The main cause for this slightly slower increase was the electricity, gas and other fuels subcategory which recorded a lower rate of inflation of 5.7% compared to the 8.5% registered in January. On a m/m basis, prices in this subcategory contracted by 1.2%. The rental payments for dwellings subcategory remained unchanged m/m, while the regular maintenance and repair of dwellings increased 0.6% m/m.

Transport, serving as the third largest basket category with a weighting of about 14%, accounted for 0.8% of annual inflation in February. Transport prices increased by 6.6% y/y and 0.6% m/m. The purchase of vehicles subcategory saw price increases of 8.2% y/y and an increase of 2.0% m/m. The cost of operation of personal transport equipment saw an increase of 7.3% y/y. Oil prices have dropped 4.7% during February reaching US$65 a barrel at the end of the month. As a result, the Ministry of Mines and Energy confirmed that fuel pump prices for February would remain unchanged for a third consecutive month.

Alcoholic beverages and tobacco prices rose by 4.4% y/y and 0.5% y/y. Alcohol prices remain the driver of the increase in this basket category which increased by 4.8% y/y and 0.6% m/m. Tobacco prices increased at a slightly slower rate at 2.9% y/y.

Namibian annual inflation of 3.5% y/y for February remains below that of South Africa. South African inflation has remained well confined within the SARB’s target band and will most likely report February data still within that range. If the currency remains strong and stable, inflation could come down further in the coming months. The rand could be volatile should the ratings agency Moody’s announce a downgrade in South Africa’s sovereign debt on 23 March.