Category Archives: Economic Research

Economic Research

NCPI – October 2017

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Annual inflation has slowed to 5.2% y/y in October, following a rise in prices of 5.6% y/y in September. Slower increases in the prices of food and non-alcoholic beverages, in addition to contracting prices for clothing and footwear contributed towards annual inflation rising at a slower rate in October. On a year on year basis, prices in three of the twelve basket categories rose at a quicker rate in October than in September, with six categories recorded lower rates of inflation, while the rate of inflation in three categories remained unchanged. Prices for goods rose by 3.1% y/y while prices for services increased by 8.0% y/y.

Housing and utilities, the largest contributor to annual inflation by weighting, recorded an increase in inflation of 8.6% y/y and a decline 0.1% m/m in October. The electricity and other fuels subcategory recorded an increase in prices of 4.1% y/y, which is a slower rate of increase compared to 6.0% registered the previous month. On a m/m basis prices in this subcategory contracted by 0.4%. Consumers were spared a fuel price increase during October and we expect prices to come under pressure following a fuel pump price increase in November and December at 40 cents and 50 cents respectively.

Food and non-alcoholic beverages contributed about 17% towards annual inflation. One of the major reasons for the slowdown in inflation this year has been the continued moderation in food inflation. Prices in this category rose by 3.7% y/y, lower than the 4.2% recorded in September. Prices for bread and cereals contracted by 2.7% y/y while prices for fish and meat rose by 15.2% and 9.2% respectively.

Alcoholic beverages and tobacco, the third largest category, saw prices increase 5.7% y/y compared to an increase of 6.0% in October of 2016. Prices of alcoholic beverages rose 5.5% y/y while tobacco prices accelerated by 6.4% y/y. Transport prices rose by 4.4% y/y and 0.6% m/m. Prices related to the purchases of vehicles rose by 6.5% y/y in October compared to 3.9% y/y increase in September.

South African inflation rose 4.8% in October following a 5.1% increase in September. The SARB kept its benchmark rate unchanged at 6.75%, having cut rates for the first time in five years in July this year. Escalating uncertainties in the economy as well as potential upside risks to inflation were cited as reasons to the latest decision to keep rates unchanged. Though annual inflation remains within the SARB’s target band, concerns remain that the rand was sensitive to political developments and weak economic growth prospects. The ratings downgrade of South Africa’s local currency to “junk” from S&P Global Ratings sent the rand tumbling. This was however offset by Moody’s decision to place South Africa on review. A ratings downgrade from Moody’s will effectively push South Africa out of major global bond indices, resulting into large capital outflows that will have significant bearing on inflation. Namibia’s foreign currency rating was recently cut to “junk” by Fitch ratings on the back of a mid-year budget review that was tainted by expenditure over-runs, disappointing revenues and escalating debt to GDP levels. Future debt issuance will most likely become more expensive as a result, especially in international capital markets. Though inflation has been

Building Plans – October 2017

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A total of 160 building plans were approved in October, 21 building plans less than what was approved in September. In value terms approvals decreased by 24.3% m/m, falling from N$116.88 million in September to N$88.46 million in October. A total of 88 completions to the value of N$51.96 million were registered in October. Completions increased by 33.1% m/m from 86 completions worth N$39.03 million in September. Year to date, N$1.91 billion worth of building plans have been approved, an increase of 13.2% y/y. On a twelve-month cumulative basis, 1,805 building plans have been approved worth approximately N$2.21 billion, 4.5% higher in value terms than the same measure for approvals in October 2016.

Additions to properties made up 130 approvals out of the total 160 approved plans recorded in October. Year-to-date, 1,287 additions to properties have been approved, increasing by 4.8% y/y and rising 7.5% y/y in value terms. Year-to-date total approvals are on track to exceed approvals registered during 2016 in value terms. As such, 2017 has been a better year than 2016 was, although not by much.

21 new residential units were approved in October, 6 less than the 27 approved in September. Year-to-date however, 244 residential units have been approved, 17 units more than in the corresponding period in 2016. In value terms, N$368.1 million worth of new residential units have been approved year-to-date, a 16.8% contraction compared to October 2016.

Commercial and industrial building plans approved amount to 41 units, worth N$675.3 million year-to-date. This is a decline of 43% in the number of plans approved from the 73 building plans approved in the corresponding period in 2016. This is however offset by the 54.2% increase in the value of these approvals compared to the corresponding period of 2016. One large commercial plan approved in May this year skews the value of approvals considerably. If one excludes this N$500 million plan, then the value of commercial and industrial plans approved year-to-date would be 60% below that of 2016 for the same period.

In the last 12 months 1,805 building plans have been approved, contracting by 0.8% compared to October 2016. Private sector credit extension growth slowed to 5.24% in September from 6.35% in August. Commercial banks are maintaining adequate monthly average liquidity positions and the slowdown credit extension growth is a sign of weak business and consumer confidence. Demand for debt has been low and the cost of debt risks becoming more expensive looking forward. Hopes of continued monetary policy support were dashed when the South African Reserve Bank (SARB) and Bank of Namibia (BoN) kept policy rates unchanged during September and October MPC meetings respectively. Mid-term budget reviews in both South Africa and Namibia that where characterised by expenditure overruns and widening budget deficits to be funded by ballooning government debt, have further exacerbated fears of credit ratings downgrades. This will place further pressure on consumers and business alike if it results in a rate hiking cycle. The outlook for a rebound in construction may thus be muted in the short term.

New Vehicle Sales – October 2017

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1,100 New vehicles were sold in October, a decrease of 3.6% m/m and 6.7% y/y. Year-to-date 11,535 new vehicles have been sold, an 18.6% decrease on October last year. On a rolling 12-month basis 13,878 new vehicles have been sold in Namibia, down 20.6% from October 2016, and down 38.8% from peak 12-month cumulative number of vehicles sales in April 2015. New vehicle sales continue to decline on a year-to-date and cumulative basis, reflecting the pressure that individuals and businesses, as well as government, are experiencing in the current economic climate.

A total of 452 new passenger vehicles were sold during October, up 2.0% m/m but down 2.6% y/y. Year-to-date passenger vehicle sales rose to 4,873, down 18.1% compared to the number sold by October last year. On a rolling 12-month basis passenger vehicle sales are at their lowest level since April 2012. On a year-to-date basis passenger vehicle sales are currently between 2011 and 2012 year-to-date figures for October, highlighting the extent of the slowdown.

Commercial vehicle sales reflect a similar picture, down 19.1% year-to-date and 21.9% on a rolling 12-month basis. A total of 648 new commercial vehicles were sold in October and 6,662 have been sold year-to-date. Light commercial vehicle sales are down 36.1% from their peak, slightly less than the 40.9% that passenger vehicle sales are down. Medium commercial vehicle sales are down 50.1% from their peak, while heavy commercial vehicles are down 46.6% since peaking in December 2015. Total new commercial vehicle sales are down 10.0% m/m, with medium commercial vehicle sales declining 30.8% from last month, light commercial vehicle sales declining 9.8% m/m, and heavy commercial vehicle sales increasing 3.0% m/m.

Toyota continues to lead the market for new vehicle sales with 34.9% of the passenger vehicle market and 48.2% of the light commercial market for the year thus far. Volkswagen holds the second place with 24.6% of passenger vehicle sales, while Nissan takes second place in the light commercial vehicles category with 16.5% of sales this year. Ford retains the third position in both passenger and light commercial new vehicle sales on a year to date basis. Hino leads the medium commercial vehicle category with 34.6% of sales while Scania remains number one in the heavy and extra-heavy commercial vehicle segment with 32.6% of the market share year to date.

The Bottom Line

Cumulative vehicle sales continue to contract on a rolling 12-month basis, and year-to-date vehicle sales figures are still below 2012 levels. This is a reflection of depressed business and consumer confidence, as well as slowed government spending on new vehicles. Tighter credit conditions have only exacerbated the above conditions. The current interest rate environment remains precarious as inflation is likely to pick up following the depreciation of the rand as well as due to higher US$ oil prices. Should a rate hiking cycle commence consumers will come under further pressure. Household debt to disposable incomes have been rising making consumers more susceptible to interest rate hikes.