Category Archives: Inflation

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.

Annual inflation remained unchanged at 5.4% in August. On a month on month basis, prices rose 0.1% following a zero percent price change recorded in July. On a year on year basis, four of the twelve basket categories rose at a quicker rate in August than in July, this was offset by slower rates of inflation in 6 categories, while the rate of inflation in two categories remained unchanged. Prices for goods rose by 3.4% y/y while prices for services increased by 8.1% y/y.

Housing and utilities is the largest contributor to annual inflation, due to its large weighting in the basket. Annual inflation for this category increased by 8.3% y/y and fell by 0.6% m/m. Annual inflation for rental payments remained unchanged at 9.6% in August and will likely remain this high for the rest of the year. Annual inflation for the electricity and other fuels subcategory was 1.8% in August, significantly slower than inflation of 6.9% recorded in July. This follows a tariff increase passed on to consumers by the City of Windhoek in July. On a monthly basis prices within the electricity and other fuels basket decreased by 3.7%, stemming from a decrease in prices of gas products, paraffin, methylated spirits, charcoal and wood.

The second largest contributor to annual inflation was food and non-alcoholic beverages, also the second largest basket item in terms of weighting, accounting for 0.8% of the total inflation figure. Prices in this category rose by 4.6% y/y, up from the 4.3% recorded in July. Three subcategories recorded decreases in price on a year-on-year basis, such as prices for bread and cereal contracting 0.5%.

Alcoholic beverages and tobacco, the third largest category, saw prices increases of 4.8% y/y compared to an increase of 5.6% in August of 2016. Prices of alcoholic beverages rose 4.5% y/y while tobacco prices accelerated by 6.0% y/y. Transport prices increased by 2.0% y/y and 0.1% m/m. Prices related to the purchases of vehicles rose by 4.2% y/y compared to 9.6% y/y one year ago.

Namibian annual inflation in August remained unchanged at 5.4%, the lowest rate of price increases since January 2016. South African annual inflation came in at less than 5% in August, for the first time since late 2015, well within the South African Reserve Bank’s (SARB) target range. Low inflation, coupled with subdued economic growth in South Africa and Namibia, provides both central banks with room to consider further rate cuts with MPC meetings scheduled for September and October respectively. Risks of higher inflation do remain, attributable to exchange rate volatility of the Rand, to which the Namibian Dollar is pegged.