Category Archives: Inflation

Annual inflation declined to 6.3% y/y in May, 0.4% y/y lower than April, while prices increased by 0.1% m/m. The lower annual figure was due to further moderation of food price inflation with is currently at 3.7% y/y, down from the 2016 average of 10.8%. Of the twelve basket items, three saw a higher annual inflation rate than the previous month, two remained unchanged, while seven categories saw lower rates of price increases. Prices for goods increased 4.9% y/y while prices for services grew 8.2% y/y, with slower growth in goods prices supported by a stronger Namibian dollar and lower food prices.

Housing and utilities remains the largest contributor to annual inflation due to its large weighting in the basket and the effect of irregularly high rental increases of 9.7% in January. This category increased by 9.8% y/y and 0.3% m/m. Annual inflation for rental payments for dwelling remained at 9.6% in May and will likely remain this high for the rest of the year. Furthermore, NamWater has been granted an approved 13% increase in water delivery, effective on 1 June while NamPower received an approved 8% from the Electricity Control Board effective 1 July this year. The increases in utilities is likely to be passed on to the consumer and should put upwards pressure on this basket category going forward. We continue to expect the housing and utilities basket category to underpin overall inflation.

Transport was the second largest contributor to annual inflation, accounting for 0.9% of the total 6.3% inflation figure. Transport prices increased 7.1% y/y and 0.6% m/m, driven largely by the 7.6% y/y increase in the price of vehicles, but also by the 9.3% y/y increase in the operational cost due to higher fuel prices.

Food and non-alcoholic beverages, the second largest basket item, was the third largest contributor to annual inflation, accounting for 0.7% of the total inflation figure. Food and non-alcoholic beverage prices increased by 3.7% y/y, a further slowdown compared to the 5.8% increase in April, well below the peak of 13.2% witnessed in January.  The slowdown in annual food inflation is largely due to lower inflation on agricultural produce resulting from good rainy seasons in parts of South Africa. Bread and cereal prices have decreased by 3.7% y/y, the price of vegetables have decreased by 4.0% y/y and fruits are only 1.5% more expensive on an annual basis.

The Alcohol and tobacco category displayed increases of 3.3% y/y and 0.1% m/m in May versus 3.9% y/y and 0.4% m/m in April. The main driver in this basket category remains alcohol prices which increased by 3.5%y/y while tobacco was up 2.6% y/y. Inflation in this category remains relatively muted despite the announcement of increased sin taxes in March.

Namibian inflation is decreasing at a faster pace than we anticipated at the start of the year. A strengthening rand and a strong decline in food prices has seen inflation moderating substantially. Similarly, South Africa has seen their inflation returning to the target band faster than expected. The rand exchange rate benefited from increased global capital inflows to emerging markets which largely offset the impact of the sovereign credit ratings downgrade. However, the possibility of further downgrades in the future remains a risk for currency weakness going forward, which would likely push inflation higher in both Namibia and South Africa.

Annual inflation declined to 6.7% in April, 0.3% lower than March. Prices increased by 0.3% m/m. The lower annual figure was due to moderation of food price inflation with is currently at 5.8% y/y, down from its 2016 average of 10.4%. Of the twelve basket items, only two saw a higher annual inflation rate, four remained unchanged, while seven categories saw lower rates of price increases. Prices for goods increased 5.6% y/y while prices for services grew 8.2% y/y, with slower growth in goods prices supported by a stronger Namibian dollar.

Housing and utilities remains the largest contributor to annual inflation due to its large weighting in the basket and the effect of irregularly high rental increases of 9.7% in January. Annual inflation in this basket category declined to 9.6% in March as the rental payments subcategory was adjusted downward by 0.1% on a m/m basis and have remained at that level in April. Furthermore an 8% tariff increase has been approved by the Electricity Control Board effective 1 July, which should put upwards pressure on this basket item going forward. We continue to expect the housing and utilities basket category to underpin overall inflation.

Food and non-alcoholic beverages, the second largest basket item, was the second largest contributor to annual inflation, accounting for 1.0% of the total 6.7% inflation. Food and non-alcoholic beverage prices increased by 5.8% y/y, a further slowdown compared to the 7.3% increase in March, and was below the peak of 13.2% witnessed in January.  The slowdown in annual food and non-alcoholic beverage inflation was partly due to base effects as well as lower inflation on agricultural produce resulting from good rainy seasons in parts of South Africa. Bread and cereal prices have moderated to 0.9% y/y, the price of vegetables have decreased by 1.3% y/y and fruits are 0.8% more expensive on an annual basis. While annual growth in coffee, tea, and cocoa prices has slowed slightly, this subcategory has still seen prices increase by 22.4% on a y/y basis, the quickest in the food basket. Fish prices are also still significantly up over last year at 15.8%.

Transport is one of the two basket categories which saw an annual increase in April. This was driven largely by the 8.2% y/y increase in the price of vehicles, but also by the 8.1% y/y increase in the operational cost largely due to higher fuel prices than last year.

The Alcohol and tobacco category displayed increases of 3.9% y/y and 0.4% m/m in April versus 4.4% y/y and 0.4% m/m in March. The main driver in this basket category remains alcohol prices which increased by 4.2%y/y while tobacco was up 2.5% y/y. Normally the effect of sin taxes result in average increases of 4.1% over the months of March and April, thus the increase of only 0.8% over those two months this year is unusually low, especially considering that sin tax increases have been larger than previous years.

Namibian inflation is decreasing at a faster pace than we anticipated at the start of the year. A strengthening rand on a y/y basis has driven a decrease in goods inflation specifically. Oil prices remain relatively stable at around US$50 to US$55/barrel, and the end of the regional drought has brought some relief to consumers with some food prices declining. The recent downgrade of South Africa’s credit rating however, has seen the rand depreciate somewhat, and more weakness could follow if local currency ratings are downgraded. This will flow through to inflation and could cause South African inflation to remain above the 3% to 6% target range for longer than expected. We also expect Namibian inflation to remain elevated in the short term, averaging around 7.4% for the year.

Annual inflation declined to 7.0% in March, 0.8% lower than in February, while prices increased by 0.1% on a m/m basis. The decrease in annual inflation was largely as a result of a drop in food prices and a slight decrease in rental payments for dwellings. Neutralising some of the impact of falling food prices was an increase in the price of vehicles and the cost of operating transport equipment due to an increase in fuel prices. Overall, prices in three of the twelve basket categories increased at a faster annual rate than during the preceding month, eight at a slower rate and one grew at a steady pace. Prices for goods increased 6.3% y/y while prices for services grew 8.1% y/y, with slower growth in goods prices supported by a stronger Namibian dollar.

Housing and utilities remains the largest contributor to annual inflation due to its large weighting in the basket and the effect of irregularly high rental increases of 9.7% in January.  Annual inflation in this basket category declined to 9.6% in March as the rental payments subcategory was adjusted downward by 0.1% on a m/m basis. We continue to expect the housing and utilities basket category to underpin overall inflation.

Food and non-alcoholic beverages, the second largest basket item, was the second largest contributor to annual inflation despite a 0.6% decrease in prices on a monthly basis. Food and non-alcoholic beverage prices increased by 7.4% y/y, a significant slowdown compared to the 11.3% increase in February. The slowdown in annual food and non-alcoholic beverage inflation was partly due to base effects of a large monthly increase in March 2016 as well as the decrease in prices on a monthly basis in March 2017. The price cuts in maize and flower seen earlier this year mean that bread and cereal prices are now only 1.5% up from March 2016. While annual growth in coffee, tea, and cocoa prices has slowed slightly, this subcategory has still seen prices increase by 22.7% on a y/y basis, the quickest in the food basket. Fish prices are also still significantly up over last year at 16.7%.

Transport costs were one of the few basket categories to see an increase in annual inflation rate in March. As suggested earlier, this is largely due to an increase in fuel prices during the month and supported by increases in vehicle prices. Growth in the annual increase in vehicle prices has continued to slow at 6.9% in March versus 9.4% in February, while growth in the cost of operating personal transport equipment increased to 8.5% y/y versus 4.5% in February.

The Alcohol and tobacco category displayed increases of 4.4% y/y and 0.4% m/m in March versus 5.4% y/y and 0.3% m/m in February. The main driver in this basket category remains alcohol prices with tobacco prices relatively flat y/y.  The increases in sin taxes should put upwards pressure on alcohol and tobacco prices in April as the increased tariff is passed on to the consumer.

Namibian inflation is decreasing at a faster pace than we anticipated at the start of the year. A strengthening rand on a y/y basis has driven a decrease in goods inflation specifically. Oil process remain relatively stable at around US$55/barrel, and the end of the regional drought has brought some relief to consumers with some food prices actually declining. The recent downgrade of South Africa’s credit rating however, has seen the rand depreciate from R12.3/US$ to R13.50/US$ with further weakness a likelihood. This will flow through to inflation and could cause South African inflation to remain above the 3% to 6% target range for longer than expected. Due to currency effects we expect annual inflation to remain elevated over the short term although possibly dipping below 7% in April.