Category Archives: Inflation

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.

Namibia’s annual inflation rate remained steady at 7.1% y/y in October. On a month-on-month basis, prices in the overall NCPI basket rose 0.2% m/m. On an annual basis, overall prices in five of the twelve basket categories rose at a quicker rate in October than in September, five categories recorded a slower rate of inflation and two recorded inflation rates consistent with those in September. Prices for goods increased by 9.7% y/y, slightly slower than the 9.8% y/y increase reported last month. Prices for services increased by 3.4% y/y, the quickest annual rise since December 2019.

Transport remains the largest contributor to the annual inflation rate, contributing 2.6 percentage points to the annual inflation rate in October. On a month-on-month basis, prices in this basket item declined for a second consecutive month after falling by 0.7% m/m in October. The decline was somewhat expected given the 100c per litre drop in the petrol price that came into effect in early October, following an even larger reduction in overall fuel prices in the month prior. Prices in the operation of personal transport equipment sub-category declined by 1.3% m/m in October while on an annual basis inflation in this category slowed to 26.8% y/y from 30% y/y in September. We expect inflation for this sub-category to pick up again in November following the 198c per litter increase in the price of Diesel that came into effect earlier this month. Prices in the public transportation services sub-category climbed by 0.4% m/m and 6.8% y/y whilst prices in the purchase of vehicles sub-category rose by 0.1% m/m and 3.4% y/y. Overall, prices in the transport basket rose by 17.8% y/y in October.

Food & non-alcoholic beverages were the second biggest contributor to annual inflation, contributing 1.7 percentage points to October’s annual inflation print. Overall, prices in this basket item rose 0.7% m/m and 9.1% y/y. All thirteen sub-categories in this basket item recorded price increases on an annual basis for the 10^th consecutive month in October. Oils and fats again saw the largest price increase on an annual basis, rising 25.5% y/y, followed by fruit prices which rose by 21.6% y/y.

Alcohol & tobacco contributed 0.9 percentage points to October’s annual inflation print. Overall prices in the basket category rose by 0.4% m/m and 6.7% y/y, the quickest year-on-year increase since October 2017. The alcoholic beverages sub-category printed inflation of 0.6% m/m and 7.4% y/y, while the prices of tobacco products fell by 0.1% m/m but increase by 3.7% y/y.

Overall, the transport-, food- and alcohol and tobacco categories accounted for 73% of October’s inflation rate and remain the most influential drivers to Namibia’s inflation print, with the other 9 categories contributing the remaining 27%.

Namibia’s October annual inflation print at 7.1% continued to trend above the SARB’s target ceiling of 6.0% for the 4^th consecutive month. South Africa by comparison saw its CPI print slow for a second consecutive month in September, but at 7.5% remains notably above the upper limit of the SARB’s target range. We expect both the SARB and the Bank of Namibia (BoN) to maintain a hawkish monetary stance for as long as inflation remains elevated above the target range. November’s diesel price increase will certainly not assist in alleviating inflationary pressures in the short run and may prolong the BoN’s fight in bringing inflation back within acceptable levels. IJG’s inflation model currently forecasts Namibia’s annual inflation rate to stay elevated above the upper target limit for the remainder of 2022, and for it to end the year at around 6.6%.