Category Archives: Inflation

The Namibian annual inflation rate remained at 7.3% y/y in November, unchanged from October. Prices increased by 0.2% m/m. The yearly increases were largely driven by the housing, water, electricity and other fuel category which increased at a rate of 7.9% y/y, the food and non-alcoholic beverages category which increased by 11.6% y/y and the alcohol and tobacco category which was up 6.5% y/y. Overall five of the twelve basket categories increased at a faster rate than the preceding month, three at a slower rate and four categories grew at a largely unchanged rate.

Housing and utilities was the largest contributor to inflation, due to its large weighting in the basket. This category increased at a rate of 0.1% m/m and 7.9% y/y and contributed 2.1% to the annual inflation figure. The high level of inflation in this category can be attributed to annual increases in rentals as well as increasing utility costs. Rental increases are normally a yearly adjustment in January. Rentals increased 7.0% m/m in January 2016 and has remained at a 7.0% y/y level ever since. Given the current state of the housing market, it is possible rental escalations may be lower next year and, and as a result of the high base, we may see this category contribute less to inflation going forward. However, the increases in utility costs continue and the water supply, sewerage service and refuse collection category increased by 1.5% m/m and 12.4% y/y.

Food and non-alcoholic beverages, the second largest basket item, was also the second largest contributor to annual inflation. Food inflation is currently running at 11.6% year on year, down slightly from the 11.7% y/y figure seen in October. The sub-categories of food generally showed strong monthly increases of between 0.5% and 1.0%, except for a 1.9% m/m increase in bread and cereals, a 0.4% m/m decrease in meat and fish which decreased by 0.8% m/m. On an annual basis, fish prices have increased by 26.6% while meat is only 4.4% more expensive. The upwards pressure on food prices is mainly a result of the drought in Southern Africa which will hopefully ease as the rainy season for 2016/17 begins.

The Alcohol and tobacco category displayed increases of 6.5% y/y and 0.6% m/m. Interestingly, tobacco prices increased by only by 0.1% y/y, while alcohol increased at a much quicker pace at 8.1% y/y. Transport prices increased by 3.7% y/y in November, purchase of vehicles increased by 9.9% y/y while public transport is 0.4% cheaper than one year ago. Hotels, Cafes and restaurants prices increased by 9.2% y/y, furnishings and household maintenance increased by 7.7% y/y and education is 7.6% more expensive on a y/y basis.  Other noteworthy items include package holidays which increased 1.1% m/m and household appliances which were 1.7% cheaper than the preceding month.

Namibian inflation remains higher than in South Africa, and expectations are for high inflation to continue in both countries. South African inflation is expected to average 6.4% in 2016 and 5.8% in 2017, according to the SARB’s November MPC forecast. These expectations are largely driven by a weaker real effective exchange rate and the pass though effect of higher Import prices. The effect of higher food inflation due to the drought, and the pass-through effect of South African food prices on Namibia will likely cause the double digit increases in food prices to continue in the short term.

Due to SA inflation expectations which return to the target band in 2017 and the low level of growth we do not anticipate repo rate increases in response to inflationary pressures from the SARB. Our expectations of Namibian inflation for 2016 is for an average of 6.7% and for 6.4% in 2017. The main reason for relatively high level being the continual increases seen in administered prices and the unrelenting food price inflation.

The Namibian annual inflation rate increased to 7.3% in October, up from the 6.9% recorded in September. Prices increased by 0.5% month on month. The yearly increases were largely driven by the housing, water, electricity and other fuel category which increased at a rate of 7.8% y/y, the food and non-alcoholic beverages category which increased by 11.7% y/y and the alcohol and tobacco category which was up 6.0% y/y. Overall five of the 12 basket categories increased at a faster rate than the preceding month, while two remained unchanged.

Housing and utilities, the largest basket item was also the largest contributor to inflation, making up 2.1% of the total annual figure. This category increased at a rate of 0.3% m/m and 7.8% y/y. Water supply, sewage services and refuse collection increased by 0.8% m/m and 13.1% y/y. The high year on year figure is a largely a result of the City of Windhoek increasing water tariffs in July, but the month on month increases continue unabated.  Rental payments and maintenance continue to grow at 7.0% and 6.1% respectively, in line with the general rate of inflation.

Food and non-alcoholic beverages, the second largest basket item, and the second largest contributor to annual inflation, increased by 11.7% year on year, down slightly from the 12% y/y figure seen in September. The month on month figure amounted to a 0.6% increase. The sub-categories of food generally showed moderate increases of between 0.3% and 0.5%, except for a 1.4% m/m increase in fruit, a 3.5% m/m increase in the price of fish and a 4.3% increase in the price of coffee and tea. Strangely, the price of dairy and oils & fats decreased by 1.4% m/m and 1.2% m/m respectively. The upwards pressure on food prices are mainly a result of the drought in Southern Africa which will hopefully ease as the rain season for 2016/17 begins.

Alcohol and tobacco displayed increases of 6.0% y/y and 0.6% m/m. Interestingly, tobacco prices decreased by 0.1% y/y, while alcohol increased in line with general prices at 7.5%.

Transport prices increased by 0.1% m/m after decreasing by 1.1% m/m in September. Purchase of vehicles decrease by 0.3% m/m and public transport is also 0.1% cheaper m/m. Over a one year period, vehicle prices are still up by 10.6%. Furniture prices increased by 0.7% m/m and 7.9% y/y, driven by increases in carpets and appliances, which increased by 3.5%m/m and 3.9% m/m, respectively. Other noteworthy items include telecommunications which increased by 4.0% on a month on month basis, and 6.0% on an annual basis, and clothing materials which increased by 2.5% m/m and 18.4% y/y.

It seems Namibian inflation is continuing to outstrip SACPI. However, inflation expectations remain high in both countries. South African inflation is expected to average 6.4% in 2016 and 5.8% in 2017, as per figures from the South African Reserve Bank. These expectations are largely driven by currency weakness and the pass though effect of higher Import prices. The effect of higher food inflation due to the drought also has a negative effect. Earlier this year the Bank of Namibia released a study by Dr. Postrick Mushendami which demonstrated that South African food inflation tends to have significant effects on the inflation in Namibia. Due to inflation expectations, which return to the target band and low level of growth we do not anticipate repo rate increases in response to inflation from the MPC.

Our expectations of Namibian inflation for 2016 is for an average of 6.6% and for 6.4% in 2017. The main reason for relatively high level being the continual increases seen in administered prices, sustained increases in rentals and housing, and the continuing pass-through effect of high food import prices.

The Namibian annual inflation rate increased to 6.9% in September, up from the 6.8% recorded in August. Prices increased by 0.2% month on month. Half of the basket categories showed higher inflation than the previous month, the most notable being Food inflation which has accelerated to 12% y/y.

Housing, water, electricity, gas and other fuels, which increased by 8% y/y was the largest contributor to the overall annual inflation figure due to it being the largest component of the basket. This was driven largely by the 12% increases seen in water supply, sewerage service and refuse collection and electricity gas and other fuels sub groups. Rapid price increases have been seen in this basket category mainly as a result of increases in inflation for water supply, sewage services and refuse collection after the City of Windhoek increased water tariffs in July.

Food prices increased by 0.9% month on month led by the large increases in the prices of fish (up 4.4% from August) and fruit (up 3.3% m/m). Food price inflation remains worrying with most of the sub groups showing yearly increases in the high teens. Coffee, tea and cocoa increased by 19.5% y/y, sugar jam and honey was up 18.7% y/y and fruit showed an increase of 17.8% y/y. The upwards pressure on food prices are mainly a result of the continuing drought in Southern Africa.

Inflation expectations remain high. South African inflation is expected to average 6.4% in 2016 and 5.8% in 2017, according to the South African Reserve Bank. These expectations are largely driven by currency weakness and the pass though effect of higher Import prices. The effect of higher food inflation due to the continuing drought also has a negative effect. Due to inflation expectations which return to the target band and low level of growth we do not anticipate rate increases from the South African MPC anytime soon.

Our expectations of Namibian inflation for 2016 is for an average of 6.5% The main reason for relatively high level being the increases seen in administered prices, but also the large step-up in rental inflation seen since January 2016. Our expectations for 2017 are also above the South African target band at of 3-6%, at 6.4%.