Category Archives: Inflation

The Namibian annual inflation rate rose to 7.0% y/y in January on the back of the 6.9% y/y increase in prices recorded in December. On a monthly basis, prices in the overall NCPI basket rose by 1.1%, compared to a 0.3% m/m increase in December. On a year-on-year basis, overall prices in eight of the twelve basket categories rose at a quicker rate in January than in December, while the other four recorded slower rates of inflation. Prices for goods increased by 9.8% y/y while prices for services rose by 3.1% y/y.

Inflation Attribution

Food and non-alcoholic beverages prices rose 14.0% in January from a year earlier. The basket category, accounting for 16.4% of the NCPI basket , contributed 2.6 percentage points to the annual inflation rate in January. This marks the first month since August 2021 that the transport category was not the top contributor to the annual inflation rate. Month-on-month food and non-alcoholic prices rose by 2.4%, the highest since March 2016. Fruit price inflation ticked up for a second consecutive month to 22.3% y/y, with citrus prices rising by 23.8% y/y, grapes by 6.7% y/y and avocados logging 64.2% y/y. The prices of breads and cereals rose by 3.0% m/m and 22.3% y/y, emanating from maize prices that are 37.2% higher than a year ago, and bread- and cake flour being 27.1% more expensive. The only sub-category to record slower inflation on an annual basis than last month was ‘oils and fats’ which posted inflation of 16.8% y/y, the lowest since March 2022. 

Transport was the second largest contributor to January’s annual inflation print, contributing 1.64 percentage points. Prices in this category rose by 11.1% y/y, the lowest since October 2021. On a month-on-month basis, transport prices fell by 3.2%, following the Ministry of Mines and Energy’s decision to lower the prices of both petrol and diesel in the beginning of January. This resulted in the operation of personal transport equipment inflation slowing to 15.9% y/y from the 22.6% recorded in December. The Ministry’s decision in the beginning of February to leave fuel prices unchanged should aid to further ease price pressure in this category. Prices of the purchase of vehicles sub-category ticked up for a fourth consecutive month to 1.3% m/m and 6.2% y/y. Public transportation services inflation remained relatively steady month-on-month and eased to 0.9% y/y from 1.4% in December. 

The alcohol and tobacco category posted inflation of 2.5% m/m and 5.8% y/y. The prices of alcoholic beverages climbed by 3.0% m/m and 6.5% y/y. The acceleration from December’s 4.5% y/y rate was mainly driven by the prices of white spirits that are 24.7% higher than a year ago. Tobacco products recorded price increases of 0.2% m/m and 2.7% y/y, with cigarette prices up 5.3% y/y while pipe tobacco prices are down 4.2% y/y.

Outlook

Namibia’s annual inflation rate of 7.0% in January came in moderately higher than South Africa’s rate of 6.9%, for the first time since April 2019. Lower fuel prices helped to tame inflationary pressure, but stubbornly high food inflation (the highest since March 2009 on an annual basis) continued to put upward pressure on the overall inflation print. 

While the housing, water & electricity category’s contribution to the annual rate, at 0.7 percentage points, was relatively low, it is worth noting that the prices for the rental payments for dwellings subcategory rose by 2.1% y/y from 1.4% y/y previously. As rental payments make up a large portion (23.3%) of the CPI basket, the low inflationary adjustment means that Namibia’s annual inflation is likely to moderate throughout the year, provided that transport inflation continues to slow. IJG’s inflation model currently forecasts Namibia’s annual inflation rate to steadily slow during the course of 2023, before reaching around 4.3% at the end of the year.

The Bank of Namibia (BoN) in its monetary policy committee today (15 February 2023) raised the repo rate by a further 25bps to 7.00%, in line with the SARB’s hike in January. Forward-rate agreements, which are used to speculate on future borrowing costs, show traders are pricing in one more 25 basis-point increase by the SARB in the current rate-hiking cycle. Should the BoN follow suit, it will take the Namibian repo rate to 7.25%, the highest since May 2009. 

Namibia’s annual inflation rate softened to 6.9% y/y in December. Prices in the overall NCPI basket rose by 0.3% m/m, marginally slower than last month. Year-on-year, overall prices in six of the twelve categories rose at a quicker rate in December than in November, four categories experienced slower rates of inflation and two categories posted inflation rates consistent with those in November. Prices of goods increased by 9.6% y/y, steady from last month. Services inflation continues to trend well below goods inflation and slowed to 3.1% y/y in December.

Inflation Attribution

Transport inflation remained the largest contributor to Namibia’s annual inflation rate, contributing 2.21 percentage points to the annual inflation rate in December. Prices in this basket item rose by 14.3% y/y but contracted by 1.0% m/m, mainly due to the 125c per litre drop in the price of diesel that came into effect in early December. All the sub-categories in the transport basket item bar the purchase of vehicles recorded slower inflation on an annual basis in December. The purchase of vehicles sub-category recorded price increases of 0.2% m/m and 4.5% y/y. Prices in the operation of personal transport equipment sub-category fell by 1.6% m/m while inflation slowed to 22.6% y/y, the slowest over the past 8 months and a sign that the relatively lower oil prices started to filter into the operating costs. Notable price relief in this sub-category is almost certain to show again in next month’s inflation print after the Ministry of Mines and Energy lowered diesel prices by a further 220 cents per litre and petrol by 180 cents per litre at the beginning of January. Prices in the public transportation services sub-category climbed by 0.1% m/m and 1.4% y/y, the slowest annual rise in prices since July 2022.

The food & non-alcoholic beverages item was the second largest contributor to the annual inflation print, marginally behind the transport basket item after it contributed 2.19 percentage points in December. Prices in this basket item rose by a sizeable 2.2% m/m and 11.8% y/y, the steepest annual inflation print since January 2017. While inflation in four of the thirteen sub-categories slowed with 1 remaining steady, the bulk of the sub-categories in this basket item recorded price increases on an annual basis in December, strikingly for the 12^th consecutive month. Oils and fats saw the largest prices increase on an annual basis, rising by 20.8% y/y, followed by fruits which saw prices rise by 20.5% y/y. Bread and cereals prices also saw a sharp increase in December, rising by 6.7% m/m and 18.2% y/y, the steepest annual price increase recorded in this sub-category over the past decade.

The alcohol & tobacco category was the third largest contributor to the inflation rate, marginally higher than Housing, Water and Electricity- and Furniture basket items. Inflation of alcohol and tobacco products slowed to 4.2% y/y in December, but continues to trend above the 3.8% inflation rate reported for this basket item a year ago. Housing, water and electricity inflation softened to 2.1% y/y, yet remained above the 1.2% y/y inflation reported in December last year. The prices of furniture increased by 10.6% y/y in December compared to 1.3% y/y a year ago.

Outlook

December saw Namibia’s annual inflation rate continuing to trend lower with the print falling below 7.0% for the first time since July 2022 and steadily moving back towards the upper end of the SARB’s target range.

While we expect inflation to continue to slow into 2023, a close eye will be kept on January’s print as the month usually marks the revision of rental prices in the NCPI basket, which anchors about a quarter of the inflation basket for the rest of the year. The current economic climate and property market dynamics have us believe that we could see another year of relatively low inflation in this line item for 2023, but somewhat higher than last year.

The SARB’s first MPC meeting for 2023 is scheduled to take place on 26 January. Recent below-expectation inflation numbers coupled with lower fuel prices and moderating food prices should all provide the SARB (and by extension the BoN) leeway to slow the pace of rate hikes.

IJG’s inflation model currently forecasts Namibia’s annual inflation rate to continue to steadily slow during the course of 2023, before reaching around 4.1% at the end of the year.

Namibia’s annual inflation rate slowed marginally to 7.0% y/y in November. Prices in the overall NCPI basket rose by 0.5% m/m, the quickest since July. Year-on-year, overall prices in seven of the twelve categories rose at a quicker rate in November than in October, three categories experienced slower rates of inflation and two categories posted inflation rates consistent with those in October. Goods inflation came in at 9.6% y/y, slowing for a third consecutive month. Services inflation, while fairly lower than goods inflation, rose for a fifth consecutive month to 3.4% y/y in November.

Contributions to the 7.0% y/y inflation print were relatively stable across the majority of the basket item categories. The largest movement was from the contribution of the alcohol and tobacco category dropping from 0.91ppt in October to 0.67ppt in November.

Transport inflation ticked up to 2.0% m/m and 18.3% y/y, following the 198c per litter increase in the price of Diesel that came into effect at the beginning of November. The basket item contributed 2.7ppt to the annual inflation rate. All three sub-categories recorded quicker inflation on an annual basis than in October. The purchase of vehicles sub-category recorded price increases of 0.8% m/m and 3.8% y/y. Prices in the operation of personal transport equipment sub-category rose by 2.8% m/m and 27.3% y/y. After recording an over-recovery of 125 cents per litre on diesel in November, the Ministry of Mines and Energy lowered diesel prices in-kind at the beginning of December while leaving petrol prices unchanged, which should ease inflation in this sub-category in December. The last two months have seen the brent crude price retrace to February levels in ZAR terms, which should lead to softer transport inflation in the coming months, should it remain at current levels. Prices in the public transportation services sub-category climbed by 0.2% m/m and 7.1% y/y.

Food & non-alcoholic beverages were the second largest contributor the annual inflation rate, contributing 1.8ppt to November’s print. Prices in this basket item rose by 0.6% m/m and 9.4% y/y. All thirteen sub-categories in this basket item recorded price increases on an annual basis for the 11^th consecutive month. Fruit saw the largest prices increase on an annual basis, rising by 19.6% y/y, followed by the prices for oils and fats which rose by 18.3% y/y. Inflation for both sub-categories were however slower than the 21.6% and 24.6% respective annual rates recorded in October.

Alcohol & tobacco inflation eased from 6.7% y/y in October to 4.8% y/y in November. Prices of the basket item rose by 0.2% m/m. Alcoholic beverages posted inflation of 0.2% m/m and 5.0% y/y, driven primarily by price increases of 21.2% y/y on white spirits. Tobacco prices, meanwhile, rose by 0.3% m/m and 4.1% y/y, attributable of cigarette inflation of 5.7% y/y, compared to pipe tobacco prices which are down 0.4% y/y.

While easing somewhat, the Namibian annual inflation rate continues to trend above the SARB’s target ceiling of 6.0%. The Bank of Namibia’s MPC decision in November to not hike rates by as much as the SARB did (50bps compared to the SARB’s 75bps) came as somewhat of a surprise, but will be welcomed by indebted consumers and businesses as it softens the blow to some extent. After the rate announcement, the governor of the BoN explained that when the MPC were analysing the incoming monetary, financial and economic data at the last monetary policy review, the members had the benefit of seeing the forecasts for the forthcoming SACU receipts for 2023, which indicated that the total amount that Namibia will be receiving will be significantly higher in 2023.

He further added that the inflation rate seems to be levelling off and that forecasts are showing oil prices remaining relatively muted for at least the next six months. The governor specifically mentioned that they do not expect much changes from the 25bps differential between Namibia and South Africa’s repo rate in terms of capital outflows. We however do not foresee the BoN deviating from the SARB much going forward.

IJG’s inflation model currently forecasts Namibia’s annual inflation rate to further ease to around 6.8% next month, and for the rate to continue steadily slowing during the course of 2023, before reaching around 4.0% at the end of 2023.