Category Archives: Inflation

Namibia’s annual inflation rate slowed marginally to 7.1% y/y in September from 7.3% y/y in August. Prices in the overall NCPI basket rose by 0.1% m/m. On a year-on-year basis, overall prices in nine of the twelve basket categories rose at a quicker rate in September than in August, two recorded a slower rate of inflation and one recorded prices consistent with August. Prices for goods increased by 9.8% y/y, while prices for services increased by 3.3% y/y.

Predictably, the transport category was the largest contributor to the annual inflation rate in September, contributing 2.8 percentage points to the annual inflation rate. The category recorded a price decline of 1.6% m/m, but transport prices are still 19.5% higher than a year ago. Two of the three sub-categories recorded slower inflation on a month-on-month basis with the operation of personal transport equipment sub-category recording a decrease of 2.1% m/m, but an increase of 30.0% y/y, on the back of the Ministry of Mines and Energy’s decision to decrease fuel prices at the beginning of September. Petrol prices were cut by 120 cents per litre and diesel prices by 65 cents per litre. Petrol prices were cut by a further 100 cents per litre in the beginning of October, however given that most of the economy operates on diesel (which did not see a change in price this time round), we expect inflationary pressure to persist. The purchase of vehicles sub-category recorded a decrease in inflation of 0.9% m/m, but rose 3.2% y/y. Prices of public transportation services remained steady on a month-on-month basis, but rose 6.4% y/y.

Food & non-alcoholic beverages was the second biggest contributor to the annual inflation rate in September, contributing 1.7 percentage points. Overall, prices in this basket item rose 0.6% m/m and 9.3% y/y, the quickest year-on-year increase since February 2017. All thirteen sub-categories in this basket item recorded price increases on an annual basis. The largest increases were recorded in the prices of oils and fats which rose by 25.5% y/y, followed by fruit which recorded an increase of 20.4% y/y, mainly attributable to the increase in prices of avocados, citrus fruits, and dried fruits.

Alcohol & tobacco inflation quickened to 5.6% y/y in September, from the 5.2% y/y increase recorded in August. On a month-on-month basis, prices of the basket category rose by 0.8%. The prices of alcohol beverages rose by 0.7% m/m and 5.8% y/y, while the prices of tobacco products increased by 1.2% m/m and 4.5% y/y.

Namibia’s annual inflation rate of 7.1% in September followed three consecutive months of quicker inflation prints and was mainly attributable to the decrease in fuel prices. The transport-, food- and alcohol and tobacco categories remain the largest contributors to inflation, accounting for 75% of the Namibian inflation rate in September, with the remaining 9 categories contributing the other 25%. South Africa’s annual inflation rate has similarly slowed in August, but at 7.6% y/y continues to trend above the SARB’s 3-6% target band and means that we will see further rate hikes by the SARB’s MPC. We expect the Bank of Namibia to reciprocate to any decisions taken by the SARB. IJG’s inflation model currently forecasts Namibia’s annual inflation rate to remain elevated for the remainder of 2022, and for it to end the year at around 7.0%.

Namibia’s annual inflation rate ticked up to 7.3% y/y in August, following the 6.8% y/y increase in prices recorded in July. August’s annual CPI rate was the quickest increase since February 2017. On a month-on-month basis, prices in the overall NCPI basket rose 0.3% m/m. On an annual basis, overall prices in six of the twelve basket categories rose at a quicker rate in August than in July, three categories recorded slower rates of inflation and three categories recorded prices consistent with the prior month. Prices of goods increased by 10.2% y/y, while prices for services increased by 3.3% y/y in August.

Transport continues to be the largest contributor to the annual inflation rate, accounting for 3.3 percentage points of the total 7.3% y/y inflation rate in August. Prices in the transport category rose 0.2% m/m and 23.2% y/y, the quickest year-on-year increase in our database stretching back to 2003. The three subcategories in the transport basket items all recorded increases on a month-on-month and year-on-year basis. The operation of personal transport equipment subcategory, which recorded price increases of 0.2% m/m and 35.4% y/y, continues to fuel most of the inflation in this basket item, with global oil prices remaining elevated. The Ministry of Mines and Energy’s announcement at the beginning of September to cut petrol prices by 120 cents per litre and diesel prices by 65 cents per litre should ease inflation of the transport category somewhat going forward, although fuel prices remain considerably higher than they were last year. The purchase of vehicles subcategory recorded inflation of 0.5% m/m and 5.5% y/y. Prices of public transportation services rose were steady month-on-month but rose 6.4% y/y.

Food & non-alcoholic beverages, the second largest basket item by weighting, was the second largest contributor to the annual inflation rate in August, contributing 1.6 percentage points. Prices in this basket item rose by 0.8% m/m and 8.8% y/y, the quickest year-on-year increase since February 2017. As has been the case in the past seven months, all thirteen sub-categories recorded price increases on an annual basis. The biggest increases were observed in the prices of oils and fats which rose by 26.1% y/y, followed by fruit which recorded prices increases of 20.0% y/y.

Alcohol & tobacco inflation slowed from 5.4% y/y in July to 5.2% y/y August. On a monthly basis, prices in the basket item decreased by 0.3% m/m. The prices of alcoholic beverages decreased by 0.2% m/m but rose by 5.4% y/y, while tobacco prices fell by 0.9% m/m but rose by 4.5% y/y.

The annual inflation rate in Namibia continues to rise and as mentioned earlier, August’s rate was the quickest since February 2017. While the rate is high, it is by no means extraordinary for Namibia, as it has reached (and breached) the 7.0% level a couple of times over the past two decades. Unsurprisingly, transport and food prices remain the main drivers of the Namibian inflation rate, contributing 68% to the country’s annual rate in August. The fuel price cuts announced at the beginning of the month should ease inflation pressure somewhat, but risks remain to the upside. South Africa’s inflation rate of 7.8% y/y in July continues to trend above the SARB’s 3-6% target band and expectation are that its MPC will hike rates by between 50-75bps in September. The BoN will respond in kind to any decision taken by the SARB. IJG’s inflation model currently forecasts the annual inflation rate to remain elevated for the remainder of 2022, and for it to end the year at around 7.1%.

The Namibian annual inflation rate rose to 6.8% y/y in July, the quickest pace since March 2017. On a month-on-month basis, inflation remained steady at 1.0% m/m. Year-on-year, overall prices in eight of the twelve basket categories rose at a quicker rate in July than in June, two categories experienced slower rates of inflation and two categories posted steady inflation. Prices for goods increased by 10.0% y/y, the fastest since February 2009, while prices for services rose by 2.5% y/y.

Transport, the third largest basket item by weighting, was the largest contributor to annual inflation, contributing 3.0 percentage point to the total 6.8% y/y inflation rate. Prices in this category increased by 3.0% m/m and by 20.9% y/y in July, the largest year-on-year increase on our records dating back to 2003. All three sub-categories in this basket recorded increases on a month-on-month basis. Operation of personal transport equipment recorded the largest increase in prices of 4.4% m/m and 35.5% y/y, attributable to the N$1.88 and N$1.34 per litre increase in petrol and diesel prices, respectively, at the start of July. Year-to-date, petrol and diesel prices are up 42.4% and 46.1% respectively. The purchase of vehicles sub-category recorded inflation of 0.9% m/m and 5.2% y/y. Prices of public transportation services rose 0.1% m/m, but fell 4.1% y/y.

Food & non-alcoholic beverages was the second largest contributor to the annual inflation rate in July, contributing 1.5 percentage points. Prices in this basket item rose 0.8% m/m and 8.4% y/y, the quickest year-on-year increase since February 2017. All sub-categories registered price increases on an annual basis. The largest increases were observed in the oils and fats sub-category, which increased by 26.5% y/y and fruits, which rose by 24.5% y/y. On a monthly basis, twelve of the thirteen sub-categories saw price increases with only the meat sub-category recording a price decrease of 1.1% m/m.

The third largest contributor to the annual inflation rate in July was the alcohol & tobacco basket item, recording inflation of 0.4% m/m and 5.4% y/y. The prices of alcoholic beverages increased by 0.4% m/m and 5.4% y/y while the price of tobacco products increased by 0.6% m/m and 5.4% y/y.

Namibia’s annual inflation rate has consistently been trending higher since August last year, and as mentioned earlier in the report, July’s print is the quickest since March 2017. While the rate is high, it is by no means extraordinary for Namibia, as it has reached (and breached) this level a couple of times over the past two decades. Rising transport and food prices continue to be the main drivers for Namibia’s inflation rate, with the two categories contributing 67% to the annual inflation rate in July. Higher transport costs should continue to filter through to other categories of goods and services via second round effects, but runaway domestic inflation is unlikely. A similarly high inflation rate in South Africa has prompted the South African Reserve Bank (SARB) to pick up the pace of tightening monetary policy, with the 75 bp rate hike in July coming in higher than most forecasts. The SARB appears to be front-loading rate increases, opting to stay ahead of central banks in developed markets, and reinforcing its commitment to anchoring inflation expectations and to preserve its credibility. We expect the Bank of Namibia’s MPC to respond in-kind at their August meeting. IJG’s inflation model currently forecasts the annual Namibian inflation rate to continue ticking higher over the next couple of months, and to average between 5.9% and 6.5% in 2022, before gradually moderating to an average of 5.6% in 2023.