Category Archives: Inflation

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.

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.