Category Archives: Inflation

Annual inflation for October slowed by 0.3 percentage points, to 5.0 percent as compared to 5.3 percent recorded a month earlier. On a monthly basis, the inflation rate increased to 0.2 percent. The annual decline in inflation was primarily on account of base effects, with food inflation continuing to slow and transport prices remaining unchanged month-on-month. Housing utilities, the largest weighting in the CPI basket, also saw no growth during October.

Education has surpassed food and non-alcoholic beverages as basket category with the highest inflation, with the cost of tertiary education continuing to grow at a rate of 9.8% per year. The rate of growth of food and non-alcoholic beverage prices has declined for the past 5 months, whereas the cost of alcoholic beverages and tobacco continues to grow at an increasing pace. The Communications category continues to see prices decrease year on year (down 1.1%), and is thus the only category of expenditure seeing actual price declines.

The decline in communications prices is a direct result of the low interconnection rates between operators within the country. The increased use of internet based communication has added further competition within the sector which has contributed to the decrease in prices.

Decreases in the global oil price are expected to filter through to the consumer in two parts over the next 18 months. First round effects should be felt in the next two months as fuel pump prices decline, while second round effects are expected to have a price-reducing effect on food prices 8-18 months out.

On account of falling oil prices, we have revised our forecast average inflation for 2014 to 5.4% in 2014, down from previous forecasts of 5.7%. We maintain our view that demand-factors are starting to lead inflation in Namibia, as strong growth in the economy with rural urban migration contributing to demand driven increases in prices. Administered and services prices are especially prone to increases caused by these effects. Recent unrest about the cost of housing is not likely to have a long term effect on the rate at which these prices grow but may have a short term influence on the rate of price increases.

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Annual Inflation for September declined by 0.1 percentage points, to 5.3% compared to 5.4% recorded August. On a monthly basis, the inflation rate eased to 0.2% from 0.3%. The annual decline in inflation resulted from food and non-alcoholic beverages, transport, recreation and culture, housing, water, electricity gas and other fuels and communication. On a monthly basis, the decrease resulted from monthly decreases recorded in all groups comprising NCPI.

The main drivers of the annual inflation were the large weighted items in the overall inflation basket: food and non-alcoholic beverages (8.4%) as well as transport (6.6%). Additional relatively smaller contributions to inflation were seen from the minor groups, such as recreation and culture (5.6%), hotels, cafes and restaurants (5.3%) and miscellaneous goods and services (4.5%).

Annual Inflation for August declined by 0.2 percentage points, to 5.4 percent as compared to 5.6 percent recorded a month earlier. On a monthly basis, the inflation rate increased to 0.3 percent from 0.2 percent. The annual decline in inflation was primarily on account of base effects, as well as price declines in a number of food category sub-items, and a decline in the cost of operation of personal transport equipment following fuel price decreases. On a monthly basis, the increase resulted from higher recorded prices in most groups comprising NCPI.

Over the past year the main drivers of inflation in Namibia were food and non-alcoholic beverage prices (up 8.6%), as well as the price of transport (up 7.1%) and education (up 8.1%). Only one NCPI basket category saw prices decrease over the year, namely communications (down 0.5%).

During August, however, annual food inflation saw a marginal decline of 0.4 percentage points, from 9.0% to 8.6%. This decline was largely driven by a month on month price decline in the sub-categories of oils and fats and vegetables.

Transport inflation declined from 8.5 to 7.1% between July and August, due to a decline in the fuel pump price during the month. Thus, the sub-component of operation of personal transport equipment, which contains fuel, declined by 2.2 percentage points, to 5.6% inflation year on year.

Following inflation increases from November 2013 to June 2014 on account of a currency-depreciation pass-through to prices, lagged first round effects of this currency weakness appear to be abating, and the stronger currency from January to August 2014 appear to be causing prices to stabilise, albeit marginally.

Going forward, we continue to forecast average inflation of 5.7% in 2014, picking up to 6.3% in 2015. Additionally, as a result of strong growth in the Namibian economy over recent years, we are starting to witness demand driven increases in a number of administered and services prices, such as administered transport prices (taxi fares), education prices, property and rent prices, and utility prices (electricity, municipal costs etc.) Additionally, pervasive Rand and thus Namibia Dollar weakness continues to drive increases in the Namibia Dollar price of commodities relative to US dollar prices.

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