Category Archives: Inflation

The Namibian annual inflation rate increased to 6.1% in February, up 0.8 percentage points from 5.3% in January. On a month on month basis, prices continued to rise, up 0.6% after the 2.4% spike seen last month. On a year on year basis, six of the twelve basket categories grew at a slower rate in February than in January while the other half accelerated, pushing up overall inflation. Transport inflation spiked during February as the effects of the drop in the price of oil over the past year, and the knock on effects thereof on the rest of the basket has worn out. However, the biggest contributors to inflation on a monthly and on an annual basis were price increases of food and non-alcoholic beverages and housing utilities.

The three heavy weighted categories in the basket that experienced accelerated annual inflation were food & non-alcoholic beverages, alcoholic beverages & tobacco and transport. Food and non-alcoholic beverages inflation was driven by the price increases across the majority of the sub-components, with only milk, cheese & eggs, non-alcoholic beverages and coffee, tea & cocoa prices rising relatively less quickly. The food price increases can largely be ascribed to the drought currently experienced in Namibia and South Africa as is reflected by price increases of fruit, vegetables and grain products such as bread & cereals.

The annual inflation rate for the category alcoholic beverages & tobacco increased from 7.5% in January to 7.9% in February and increased 0.6% on a monthly basis. Accelerating price increases in this category was largely driven by alcoholic beverages which increased to 8.3% in February, slightly offset by prices of tobacco easing to 6.7% in February, down from 7.4% in January. On the back of the announcement by the Minister of Finance that sin-taxes have been increased, we expect prices of alcoholic beverages & tobacco to accelerate further in March.

The annual inflation rate for the transport basket category spiked to 4.7% in February after turning positive in January for the first time in twelve months. The reason for this jump is primarily due to base effects, as the effects of the drop in the price of oil over the past year have now worn out. Transport is the third largest basket category by weighting and as such has had a large impact on overall inflation. The prolonged low fuel prices, due to the oil rout, have provided consumers with some price relief worldwide, and to some extent in Namibia as well. The effects of cheap transportation flow through to many other basket categories, and in this way contributed to lower overall inflation. However, we expected to see higher inflation as the effects of the drop in the price of oil over the past year and the knock on effects thereof wear out.

In conclusion, we expect inflation to accelerate further in 2016 as the full benefit of cheap oil has worn out with the weak currency causing import prices to rise. Looming drought conditions as well as increasing utilities costs should further see inflation pick up in basket categories such as food and non-alcoholic beverages, and alcoholic beverages and tobacco and housing.

The Namibian annual inflation rate increased to 5.3% in January, up 1.6 percentage points from 3.7% in December. On a month on month basis, prices spiked 2.4%, the largest monthly increase recorded in our history dating back to 2002. On a year on year basis, five of the twelve basket categories grew at a slower rate in January than in December while the seven remaining categories accelerated, pushing up overall inflation. Transport prices increased for the first time in twelve months as the effects of the drop in the price of oil over the past year, and the knock on effects thereof on the rest of the basket, started to wear out. However, the biggest contributor to inflation on a monthly and on an annual basis were price increases of rental payments for dwellings by both owners and lessees in the housing utilities category.

The three heavy weighted categories in the basket that experienced accelerated annual inflation were food & non-alcoholic beverages, housing utilities and transport. Food and non-alcoholic beverages inflation was driven by the price increases across the majority of the sub-components, with only meat, fish and sugar prices rising relatively less quickly. The food price increases can largely be ascribed to the drought currently experienced in Namibia and South Africa.

The annual inflation rate for the category housing, water, electricity, gas & other fuels increased significantly from 2.7% in December to 7.6% in January and increased 5.9% on a monthly basis. Accelerating price increases in this category was largely driven by rental payments for dwellings by both owners and lessees which increased to 7.2% in January, compared an average of 1.7% over the last two years. As we highlighted in previous reports, CPI as reported by the NSA seems to be out of line with the price pressures that consumers are actually experiencing. Anomalies such as low housing inflation stand out as examples of this. Anecdotal evidence suggests that rental prices rise by 8% – 10% per year, and finance costs have risen by approximately 7% over the last year, yet the official data states the average inflation was only 1.7% over the last two years. The inflation rate has been affected by these anomalies to a large extent, which is concerning as the repercussions of the drought and the weak exchange rate has not yet taken full effect on the inflation rate.

The annual inflation rate for the transport basket category turned positive for the first time in twelve months as the effects of the drop in the price of oil over the past year is starting to wear out, partially due to the severe rand depreciation towards the end of 2015. The category continued to contract on a monthly basis, however, exhibiting year on year inflation of 0.9% compared to an average contraction of 2.1% in 2015. Transport is the third largest basket category by weighting and as such has had a large impact on overall inflation. The prolonged low fuel prices, due to the oil rout, have provided consumers with some price relief worldwide, and to some extent in Namibia as well. The effects of cheap transportation flow through to many other basket categories, and in this way contributed to lower overall inflation. However, with the effects of the drop in the price of oil over the past year and the knock on effects thereof starting to wear out, we should see higher inflation this year.

In conclusion, we expect inflation to pick up in the first half of 2016 as the full benefit of cheap oil is reached and the weak currency causes import prices to rise. Looming drought conditions as well as increasing utilities costs should further see inflation pick up in basket categories such as food and non-alcoholic beverages, and alcoholic beverages and tobacco and housing.

The Namibian annual inflation rate increased to 3.7% in December, up from 3.3% in November. On a month on month basis prices rose by 0.2% for the third consecutive month. On a year on year basis, five of the twelve basket categories grew at a slower rate in December than in November while the seven remaining categories accelerated, pushing up overall inflation, while transport prices contracted, although at a slower pace. Year on year inflation exceeded the 12-month average for the first time in 16 months, with the effects of the drop in the price of oil over the past year and the knock on effects thereof starting to wear out.

The two heavy weighted categories in the basket that experienced accelerated annual inflation were alcoholic beverages & tobacco, and housing utilities. Alcoholic beverages & tobacco inflation was driven by the price increases of alcoholic beverages accelerating to 7.7% year on year over the festive season, up from 5.9% in November, slightly offset by inflation for tobacco that eased by 0.7pps. Accelerating price increases in the housing utilities category was largely driven by electricity, gas & other fuel prices rising relatively more quickly, while price inflation of water supply and other municipal services were unchanged at 10.5% year on year in December.

The easing in food and non-alcoholic beverages inflation was due to inflation of the majority of the sub-components slowing down, with meat prices rising relatively less quickly, followed by fruit, soft drinks & juices as well as bread & cereals price inflation slowing down.

The only category that experienced a price contraction on an annual basis was transport, however, the transport deflation slowed when compared to November. The transport basket category continues to be a drag on overall inflation, exhibiting year on year inflation of -0.3% and month on month inflation of -0.01%. Transport is the third largest basket category by weighting and as such has a large impact on overall inflation. The deflation experienced by this basket category is largely due to the operation of personal transportation equipment becoming less expensive. Prolonged lower fuel prices due to the oil rout have provided consumers with some respite worldwide and to a large extent in Namibia as well. The effects of cheap transportation flow through to many other basket categories and in this way contribute to lower overall inflation.

We expect inflation to remain low as oil prices have fallen further during January. However, we expect inflation to pick up in the first half of 2016 as the full benefit of cheap oil is reached and the weak currency causes import prices to rise. Looming drought conditions as well as increasing utilities costs should further see inflation pick up in basket categories such as food and non-alcoholic beverages, and alcoholic beverages and tobacco.