Category Archives: Economic Research

Economic Research

Building Plans – August 2017

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A total of 172 building plans were approved in August, an increase of 43 from the 129 approvals in July. In value terms however, approvals fell by N$24.7 million to N$116.2 million in August from N$140.9 million worth of approvals in July. A total of 29 completions to the value of N$20.1 million were recorded in August. This was a decline in dollar terms of N$71 million compared to N$91.1 million worth of completions in July. Year to date, N$1.71 billion worth of building plans have been approved, 22% higher than the corresponding period in 2016. On a twelve-month cumulative basis, 1,851 building plans were approved worth approximately N$2.28 billion, 4.2% higher in value terms than approvals in August 2016.

Of the total 172 plans approved in August, additions to properties accounted for 148 of those approvals. Additions to properties amounted to 105 in July, with this category usually making up the majority of approvals. This is an indication that there is continuous investment by property owners in the upkeep and improvement of property. Year to date, 1,008 additions to properties have been approved to the tune of N$749.4 million, 6.2% more than in the corresponding period in 2016.

New residential units accounted for 22 of the total 172 approvals registered in August. Year to date 196 residential units have been approved, 45 more than in the corresponding period in 2016. In value terms, N$323 million worth of new residential plans have been approved year-to-date, 0.6% lower than the N$324.8 million in August 2016. On a monthly basis, new residential unit approvals increased by 37.5%, an encouraging sign given the slowdown in private sector credit extension.

Commercial and industrial building plans approved for the year to date amount to 27 units, worth N$641.8 million. This being lower than the 55 building plans approved by the end of August 2016, although higher in dollar terms than the N$322 million in the corresponding period of 2016. Two commercial building plans valued at N$13.7 million were approved in August. On a 12 month-cumulative basis, commercial and industrial property approvals rose by 25.4% in value terms in August compared to the corresponding period in 2016, with the total number of plans approved falling only by 2 units.

The 12-month cumulative number of building plans approved have been ticking up slightly since May, however falling marginally in August. In the last 12 months 1,851 building plans have been approved, 0.1% more than in August 2016. Government has reported settling all outstanding invoices, with the construction industry being a relieved recipient of those dues. However, with government still in a fiscal consolidation cycle and spending less on capital and infrastructure projects, we expect the sector to remain under pressure for the remainder of the year. Bank of Namibia (BoN) only recently cut interest rates by 25 basis points following the South African Reserve Bank’s (SARB) decision in July. The slowdown in inflation on the backdrop of subdued economic growth, has provided room to both central banks for further rate cuts, with MPC meetings scheduled for September and October respectively. Further relaxation of monetary policy in turn provides consumers with relative but very welcome relief that does flow through to their discretionary income.

NCPI – August 2017

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Annual inflation remained unchanged at 5.4% in August. On a month on month basis, prices rose 0.1% following a zero percent price change recorded in July. On a year on year basis, four of the twelve basket categories rose at a quicker rate in August than in July, this was offset by slower rates of inflation in 6 categories, while the rate of inflation in two categories remained unchanged. Prices for goods rose by 3.4% y/y while prices for services increased by 8.1% y/y.

Housing and utilities is the largest contributor to annual inflation, due to its large weighting in the basket. Annual inflation for this category increased by 8.3% y/y and fell by 0.6% m/m. Annual inflation for rental payments remained unchanged at 9.6% in August and will likely remain this high for the rest of the year. Annual inflation for the electricity and other fuels subcategory was 1.8% in August, significantly slower than inflation of 6.9% recorded in July. This follows a tariff increase passed on to consumers by the City of Windhoek in July. On a monthly basis prices within the electricity and other fuels basket decreased by 3.7%, stemming from a decrease in prices of gas products, paraffin, methylated spirits, charcoal and wood.

The second largest contributor to annual inflation was food and non-alcoholic beverages, also the second largest basket item in terms of weighting, accounting for 0.8% of the total inflation figure. Prices in this category rose by 4.6% y/y, up from the 4.3% recorded in July. Three subcategories recorded decreases in price on a year-on-year basis, such as prices for bread and cereal contracting 0.5%.

Alcoholic beverages and tobacco, the third largest category, saw prices increases of 4.8% y/y compared to an increase of 5.6% in August of 2016. Prices of alcoholic beverages rose 4.5% y/y while tobacco prices accelerated by 6.0% y/y. Transport prices increased by 2.0% y/y and 0.1% m/m. Prices related to the purchases of vehicles rose by 4.2% y/y compared to 9.6% y/y one year ago.

Namibian annual inflation in August remained unchanged at 5.4%, the lowest rate of price increases since January 2016. South African annual inflation came in at less than 5% in August, for the first time since late 2015, well within the South African Reserve Bank’s (SARB) target range. Low inflation, coupled with subdued economic growth in South Africa and Namibia, provides both central banks with room to consider further rate cuts with MPC meetings scheduled for September and October respectively. Risks of higher inflation do remain, attributable to exchange rate volatility of the Rand, to which the Namibian Dollar is pegged.

 

New Vehicle Sales – August 2017

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New vehicle sales of 1,094 units were recorded in August, with sales falling by 19.9% from the 1,366 new vehicles sold in August 2016. On a m/m basis, new vehicle sales fell by 18.7%, with August recording 252 less in sales than July. Year to date, 9,272 vehicles have been sold, 21.4% less than sales recorded in the corresponding period of 2016. Of the 9,272 vehicles sold this year, 3,978 were passenger vehicles, 4,848 were light commercial vehicles, and 446 were medium and heavy commercial vehicles.

Passenger vehicle sales fell by 24.5% y/y, to 400 vehicles, while commercial vehicle sales have fell by 17.0% y/y. Of the 694 commercial vehicles sold in August: 650 were classified as light, 12 as medium and 32 as heavy. Heavy commercial vehicle sales contracted by 25.6% y/y. The highest volume for this calendar year so far, was the sales in June of 83 units, which provided some optimism as increased capital spending pointed toward improving business confidence. Light commercial vehicles sales make up the bulk of this category’s sales, reporting a decline of 15.7% m/m and falling 15.1% y/y.

On a twelve-month cumulative basis, vehicle sales remain under pressure, contracting by 24.4% y/y. Instalment credit, which is mainly used to finance vehicle purchases, has slowed considerably. Although, instalment credit increased by 0.5% m/m in July, this followed six months of consecutive m/m declines, bringing the annual growth to -1.4% y/y.

Year to date, Toyota and Volkswagen continue to maintain their strong hold on the passenger vehicle market. Based on the number of new vehicles sold, claiming 36% and 25% of the market respectively. They were followed by Ford and Mercedes at 7% and 4% respectively, while the rest of the passenger vehicle market continues to be shared by several competitors. Toyota also remains the leader in light commercial vehicle sales with 47% of the market, followed by Nissan at 16%. Ford and Isuzu claimed 12% and 9% of the number of light commercial vehicles sold in 2017.

Hino leads in medium commercial vehicles with 33% of the market, with Iveco following with 27%. In the heavy and extra heavy category, Scania and Mercedes have sold the most vehicles, claiming 29% and 17% of the market respectively. UD Trucks came in at third, with 14% of the number of vehicles sold in this category in 2017.

The Bottom Line

Overall vehicle sales are under pressure and have been since late 2015. The Private Sector Credit Extension (PSCE) growth figures prove testament to waning consumer and business confidence and an already stretched consumer as instalment credit, mainly used to finance capital goods, remains sluggish. The amendments to the Credit Agreement Act had a significant effect on consumer spending as well. Bearing in mind that government is still in its fiscal consolidation cycle with no with little to no plans to increase capital expenditure in sight. Vehicle sales showed signs of slight improvement the previous three months before slumping by 18.7% m/m, and is likely to remain subdued going forward.