Category Archives: Inflation

The Namibian annual inflation rate shot up to 8.2% y/y in January, 0.9% higher than the 7.3% y/y recoded in December. Prices increased by 3.2% m/m, the largest monthly increase in the 14-year history of our data set. Annual inflation was mainly driven by housing, water, electricity and other fuel category which increased at a rate of 9.3% y/y and the food and non-alcoholic beverages category which increased by 13.2%. Overall prices in eight of the twelve basket categories increased at a faster rate than during the preceding month, three at a slower rate and one grew at a steady rate. At the end of January service inflation was notably higher than during the preceding month due to once off yearly increases. Prices for goods increased 8.1% y/y while services were 8.3% more expensive on a y/y basis.

Housing and utilities was the largest contributor to annual inflation, due to its large weighting in the basket and the seasonal effect of rental increases. Overall the housing category increased 7.6% m/m and 9.3% y/y. This resulted in a contribution of 2.7% to the annual inflation figure. The high monthly figure was largely due to rental payments which increased by 9.7% m/m, the largest monthly increase to date. Most of the other subcategories remained relatively unchanged m/m, but water supply, sewerage service and refuse collection is still increasing by 12.4% y/y while electricity is 6.7% more expensive than last January.

Food and non-alcoholic beverages, the second largest basket item, was the second largest contributor to annual inflation. Food inflation is currently running at 13.2% y/y, up from the 12.5% y/y figure seen in December. The sub-categories of food generally showed very high monthly increases of between 1.0% and 2.5%, while fruit and vegetable prices were up 3.6% m/m and 2.7% m/m respectively. On an annual basis, fish prices have increased by 23.3% y/y while confectionaries are 19.7% more expensive. The upwards pressure on food prices is mainly a result of the drought in Southern Africa which could ease as the rainy season reduces some the dependence on expensive imports.

Transport prices increased by 1.0% m/m and 5.2% y/y in January, as pump prices have increased by 20c for petrol and 30c for diesel. Given that oil prices are on an upward trajectory, we may see further increases in fuel prices and further rises in transport inflation. The Alcohol and tobacco category displayed increases of 5.8% y/y and 0.5% m/m. Tobacco prices increased by 1.3% y/y, while alcohol increased at a much quicker pace at 6.9% y/y. Furnishings was another contributor to overall annual inflation, increasing 2.5% m/m and 9.5% y/y.

Namibian inflation is now much higher than that of South Africa, and expectations are for high inflation rates to continue in both countries. South African inflation is expected to average 6.2% in 2017, according to the SARB’s January 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, although likely to ease around April/May of 2017.

Due to expectations of high SA inflation, which remain outside of the target band for most of 2017, we will monitor the March MPC statement closely for a more hawkish SARB. However, given the low level of growth, which has been revised downwards to 1.1% in January, we do not anticipate repo rate increases in response to inflationary pressures in South Africa.

Annual inflation in Namibia averaged 6.7% in 2016, however given the surprisingly high monthly increases witnessed in January, inflation can be expected to accelerate sharply in 2017. The large monthly increase was driven mainly by rental increases of 9.7% m/m, the largest increase in the last 14 years. Thus, we have revised our inflation expectation for 2017 to average 7.9%, significantly higher than the 6.4% previously expected.

The Namibian annual inflation rate remained at 7.3% y/y in December, unchanged from November. Prices increased by 0.2% m/m. The yearly increases were largely driven by the food and non-alcoholic beverages category which increased by 12.5% y/y, as well as the housing, water, electricity and other fuel category which increased at a rate of 7.6% y/y. Overall prices in five of the twelve basket categories increased at a faster rate than during the preceding month, five at a slower rate and two at the same rate as during the preceding month. At the end of December goods inflation was notably higher than that of services. Prices for goods increased 7.8% y/y while services were 6.6% more expensive on a y/y basis.

Food and non-alcoholic beverages, the second largest basket item, was the largest contributor to annual inflation. Food inflation is currently running at 12.5% y/y, up from the 11.5% y/y figure seen in November. The sub-categories of food generally showed strong monthly increases of between 0.7% and 1.0%, except for quick acceleration in the prices of meat, up 3.1% m/m, and fruit which increased 3.0% m/m. On an annual basis, fish prices have increased by 25.9% y/y while confectionaries are 17.5% more expensive. The upwards pressure on food prices is mainly a result of the drought in Southern Africa which could ease as the rainy season reduces some the dependence on expensive foreign imports.

Housing and utilities was the second largest contributor to annual inflation, due to its large weighting in the basket. This category remained flat m/m and increased 7.6% y/y. This resulted in a contribution of 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. Rental costs 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. Most of the subcategories remained unchanged m/m, but water supply, sewerage service and refuse collection is still increasing by 12.4% y/y while electricity is 9.1% more expensive than last December.

The Alcohol and tobacco category displayed increases of 5.6% y/y and 0.0% m/m. Tobacco prices increased by 0.9% y/y, while alcohol increased at a much quicker pace at 6.8% y/y. Transport prices increased by 3.9% y/y in December, purchase of vehicles increased by 10.8% y/y while public transport is 0.5% cheaper than one year ago. Pump prices have increased early in January and global oil prices are on an upward trajectory. As a result transport inflation should increase in 2017. Hotels, Cafes and restaurants prices decreased by 0.6% m/m and package holidays and accommodation were also 3.9% and 1.9% cheaper respectively on a monthly basis as the service industry competed for clientele over the festive season.

Namibian inflation remains higher than in South Africa, and expectations are for high inflation rates 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, although likely to ease around April/May of 2017.

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. Annual inflation averaged 6.7% in 2016 and we expect this to moderate to 6.4% in 2017.

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.