Category Archives: Inflation

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.

Annual inflation continues to descend further since the start of the year, falling to 5.4 % y/y in July, 0.7% lower than in June. On a month-on-month basis prices remained flat. The slowdown in annual inflation was largely due to a decline in transport prices. Overall, prices in two basket categories rose at a faster annual rate than during the preceding month, eight at a slower rate and two grew at a steady pace. Prices for goods rose by 3.5% y/y while prices for services rose by 8.1% y/y.

The largest contributor to annual inflation remains Housing and utilities due to its large weighting in the basket. This category rose by 0.3% m/m and 9.1% y/y. January 2017 saw an irregular high rental increase of 9.7%. Annual inflation for rental payments for dwellings remained unchanged at 9.6% in July and will likely remain this high for the rest of the year. The effect of the tariff increases passed on by the City of Windhoek have seen prices of water supply rise by 6.6%. Furthermore, the City of Windhoek has requested for a 10% electricity tariff increase submitted to the Electricity Control Board (ECB) pending approval. Should approval be granted, this should see price levels ticking up. We continue to expect the housing and utilities basket category to underpin overall inflation.

Food and non-alcoholic beverages was the second largest contributor to annual inflation and serves as the second largest basket item in weighting, accounting for 0.8% of the total inflation figure. Prices in this category rose by 4.3% y/y while three subcategories became cheaper, such as bread and cereal prices which declined by 0.6% y/y.

Alcoholic beverages and tobacco prices rose by 3.6% y/y and 0.3% m/m in July compared to 3.0% y/y in June. Alcohol prices have been the predominant driver within this category. However, that role reversed in July with tobacco prices rising by 6.2% y/y while alcohol prices rose 3.0% y/y. Transport, miscellaneous and education individually accounted for 0.3% of the total 5.4% inflation recorded in July. Transport prices increased by 2.4% y/y and fell 1.0% m/m as the cost of vehicles subcategory rose by 0.5% m/m but the cost of operating personal transportation equipment decreased by 1.8% during the month, muting overall inflation for the transport basket category.

Slower increases in food prices since the start of the year have been a large contributor towards the slowdown in annual inflation. Transport prices being the third largest basket category had a significant impact on the downtrend in annual inflation. The Rand took a knock following the failed motion of no confidence against president Jacob Zuma, but fears of further immediate downgrades were squashed when S&P stated that the failed motion did not have ruling on any downgrade scenario. With the SARB having cut monetary policy rates in a bid to support growth and SA inflation returning to within the target band, inflation seems set to remain within these levels. However, it remains to be seen whether the currency will deteriorate further.