Category Archives: Inflation

Namibian annual inflation remained unchanged at 5.0 percent in November, while on a monthly basis it increased from 0.1 to 0.2 percent. The consumption categories experiencing the largest price increases over the past 12 months were education (8.1%), alcoholic beverages and tobacco (7.8%) and food (7.2%). Only one consumption category saw prices decline, namely communications, which saw prices decline 1.4 percent over the 12 month period.

On a weighted basis, largely due to their heavy weightings in the NCPI basket, over 75 percent of total inflation stemmed from food and non-alcoholic beverages, alcoholic beverages and tobacco, housing, water, electricity, gas and other fuels and transport.

On the back of above-trend growth in Namibia, we continue to see locally administered prices, particularly for services, experiencing above (weighted) average inflation. While annual NCPI (i.e. weighted average inflation) was 5.0 percent in November, a number of services were significantly higher, with some in excess of double this figure. These high inflation levels, being above average inflation, increase the average. Public transport saw the highest annual increase in prices of local administered prices, increasing by 11.0 percent, while electricity gas and other fuels increased by 10.5 percent. Many other services saw high-single-digit inflation, as illustrated in the table below. Strangely, and in contradiction to extensive but anecdotal evidence, rental inflation was well below average inflation over the past 12 months, at just 1.9 percent.

Nevertheless, official measures of service inflation remain below that of goods, at 3.7 and 5.9 percent, respectively.

As oil price declines are transmitted to consumers, we expect to see goods inflation falling, starting with transport prices (current to three months out), followed thereafter by food prices (six to 18 months out). Inflation for the year (2014) is expected to average 5.4 percent, marginally below initial expectations of 5.6 percent.

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%).