Category Archives: Inflation

The Namibian annual inflation rate moderated markedly to 3.6% y/y in January following the 5.2% y/y increase in prices recorded in December. Inflation was 1.6% m/m, the largest monthly increase in prices within the last twelve months, as is usually the case in January due to rental price adjustments. The slowdown in annual inflation was mainly driven by the housing, water, electricity, gas and other fuels category which slowed to 3.6% in January from 9.2% observed in December. On a year on year basis, overall prices in four of the twelve basket categories rose at a quicker rate in January, with six categories recording slower rates of inflation and two categories saw unchanged rates of inflation. Prices for goods increased by 2.9% y/y, while prices for services increased by 4.4% y/y, a material slowdown from the 8.0% increase recorded in December.

Despite recording a substantially slower rate of inflation, housing and utilities remains the largest contributor to annual inflation by way of being the largest weighted category. Overall the housing and utilities category recorded inflation of 3.6 y/y, which is significantly lower than the 9.2% y/y increase in December. This lower rate of inflation was caused mainly by rental inflation which slowed from 9.7% y/y in January of 2017 to 2.6% y/y in January 2018. On a monthly basis, rental payments increased by 2.6%. Rental adjustments are put in effect at the beginning of the year and this base is often carried forward for the rest of the year. Lower rental inflation in January this year should thus translate to lower overall CPI figures for the rest of the year. The rest of the subcategories remained relatively unchanged m/m, with regular maintenance and repairs on dwellings increasing by 0.1% m/m while electricity, gas and other fuels increased by 0.3% m/m.

Transport, with a weighting of about 14%, serves as the third largest basket category, accounting for 0.8% of annual inflation in January and making it the second largest contributor this month. Transport costs increased by 0.6% m/m and 6.3% y/y. Oil prices rallied for much of January, reaching US$71 a barrel, the highest level since late 2014. A strengthening rand that began its surge mid-December, however, allowed for fuel pump prices to remain unchanged for a second consecutive month.

Inflation in the alcoholic beverages and tobacco category was 4.2% y/y and 0.2% m/m. Tobacco prices increased by 3.4% y/y, while alcohol prices increased at a slightly quicker pace of 4.4% y/y, according to the NSA.

Namibian annual inflation at 3.6% y/y is once again lower than that of South Africa, with South Africa inflation expected to average at 4.9% in 2018, according to the SARB’s January MPC statement. Food price inflation slowed since South Africa recovered from the drought, despite the current drought experienced in the Western Cape. Likewise, Namibia also emerged from the drought and experienced the same moderation in food inflation. Inflation expectations will further be driven by exchange rates, with the rand having strengthened since the transition of power within the ANC. The currency continued to gain ground following the parliamentary election of Cyril Ramaphosa as president of South Africa.

The Namibian annual inflation rate remained unchanged at 5.2% y/y for a third consecutive month. Prices increased by 0.2% m/m. Prices for food and non-alcoholic beverages, which was largely the driving force behind the moderation in annual inflation, continued to increase at slower pace in December. On a year on year basis, overall prices in five of the twelve basket categories rose at a quicker rate in December, with five categories recording slower rates of inflation and two 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 November.

Housing and utilities contributed towards more than half of the annual inflation figure of 5.2% in December. This is also the largest basket item due to its weighting. This category remained relatively flat month-on-month, increasing only 0.5% and increasing 9.2% y/y. Year-on-year price increases within the subcategories showed little change from those recorded in November, with the one exception being price increases for electricity and other fuels of 8.3% y/y in December, up from 4.6% y/y in November. This follows two consecutive months of fuel pump price increases in November and in the beginning of December, which have contributed to the faster rate of increase in the prices of this subcategory. Prices for regular maintenance and repair of dwellings increased by 0.2% m/m.

Transport, with a weighting of about 14%, serves as the third largest basket item. Accounting for 0.9% of annual inflation in December and making it the second largest contributor. Prices for transport rose by 6.7% y/y, marginally quicker than the increase of 6.1% y/y recorded in November. Prices related to the purchases of vehicles increased at a slower pace in December, rising by 6.8% y/y compared to 7.5% y/y increase in November.

The alcoholic beverages and tobacco category showed slower increases of 4.6% y/y and contracted 0.7% m/m, compared to increases of 5.4% y/y and 0.3% m/m in November. Tobacco prices increased by 4.1% y/y, while alcohol increased at 4.7% y/y.

Namibian annual inflation averaged 6.2% for the year 2017, having moderated throughout the course of the year due largely to the slowdown in food inflation. South African inflation has remained well contained within the SARB’s target band and is most likely set to report December data still within that range. Although buoyed by a strengthening currency, short term risks to the upside for inflation are ever present. There has been a rally in the price of oil since mid-December and does present a case for an increase in the prices of imported goods. Further risks to an uptick in inflation exist in the imminent decision from Moody’s review on SA’s sovereign credit rating. This decision will be preceded by a February budget that, amongst others, could include details on how the newly approved free higher education will be funded. A disappointing budget preceded or followed by a possible downgrade will lead to a fallout from major global bond indices, resulting in a weaker currency and definite inflationary pressures.

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.