Category Archives: Inflation

Annual inflation declined to 6.1% y/y in June, 0.2% y/y lower than in May, while prices increased by 0.1% m/m, similar to the price level increase witnessed in May. The slowdown in annual inflation was caused mainly by moderation in the price inflation levels of transport and alcoholic beverages and tobacco. Of the twelve basket items, four saw a higher annual inflation rate than the previous month, three remained relatively unchanged, while five categories saw lower rates of price increases. Prices for goods increased by 4.5% y/y while prices for services grew by 8.2% y/y.

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 but remained approximately unchanged month on month. Annual inflation for rental payments for dwelling remained at 9.6% in June and will likely remain this high for the rest of the year. Furthermore, the City of Windhoek has put into effect a 13% tariff increase on water consumption, effective the 1st of June, with a request for a 10% electricity tariff increase submitted to the Electricity Control Board (ECB) pending approval. With the increases in utilities now passed on to the consumer, we believe that this will most likely put upward pressure on this basket category 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 in weighting, was the second largest contributor to annual inflation, accounting for 0.8% of the total inflation figure. Food and non-alcoholic beverage prices increased by 4.6% y/y, ticking up from the 3.6% recorded in May, still considerably below the peak of 13.2% witnessed in January. Bread and cereal prices have decreased by 2.8% y/y, while the price of vegetables decreased by 2.1% y/y and fruits now 6.3% more expensive on an annual basis.

Transport was the third largest contributor to annual inflation, accounting for 0.7% of the total 6.1% inflation figure. Transport prices increased by 5.0% y/y but remained flat month on month, with the yearly increase driven largely by the 5.8% y/y increase in the cost of operating personal transport equipment.

The alcohol and tobacco category displayed increases of 3.0% y/y with a decrease of 0.3% m/m in June versus 3.3% y/y and 0.1% m/m in May. The main driver in this basket category remains alcohol prices which increased by 3.2% y/y while tobacco was up 2.3% y/y. Inflation in this category remains very subdued despite the announcement of increased sin taxes in March.

Namibian inflation continues to decrease at a faster pace than was anticipated at the start of the year. A strengthening rand and a strong decline in food prices has seen inflation moderating substantially. Increased utilities consumption tariffs imposed by the City of Windhoek this month should change the dynamic towards a slight uptick in inflation going forward, this happening within the basket that is the largest contributor towards 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.