The Namibian annual inflation rate increased further to 6.7% in May. On a month on month basis, prices continued to rise, up 0.5% after the 0.6% uptick seen last month. On a year on year basis, six of the twelve basket categories grew at a quicker rate in May than in April, pushing up overall inflation. The biggest contributor to inflation on a monthly basis, as well as on an annual basis were price increases of food and non-alcoholic beverages.
On a month on month basis, price increases in the food and non-alcoholic beverages basket category have largely been driven by oils and fats price increases as well as increases in bread and cereals prices. Annual inflation in the food and non-alcoholic beverages basket category jumped to 12.2% in May from 11.1% in April. Relentless drought conditions in the country coupled with the depreciation of the Namibian dollar and rebasing effects resulting from low oil prices on prior periods has led to high inflation growth in this basket category.
Alcoholic beverages and tobacco as the fourth largest basket category made the second largest contribution to monthly inflation followed by recreation and culture. On a year on year basis price increases on alcoholic beverages and tobacco increased from 7.1% in April to 7.3% in May. Alcoholic beverages and tobacco inflation has been consistently above the average inflation figure for most of the last five years when looked at on an annual basis, more consistently so than almost any other basket category.
The annual inflation rate for the category housing, water, electricity, gas and other fuels saw a moderate increase of 0.1% to 7.6% in May, after spiking from an average rate of well below 3% in 2015. Rapid price increases have been seen in this basket category mainly as a result of increases in inflation for rentals and other dwellings and will be higher for the Windhoek residents going forward, due to a 10% increase in water prices in June to be administered by the City of Windhoek.
The annual rate of inflation in the transportation basket category, the third largest category, slowed almost by half in May to 1.5% from 2.8% in April. This decrease was largely as a result of a decrease on the cost of operating personal transport equipment. We expect to see a pickup in transportation inflation due to recent fuel price increases in May as well as base effects coming through on the oil price.
Going forward we expect a further uptick in inflation in June largely due to base effects caused by the drop in oil prices last year as well as more recent currency movements. Adverse effects of the drought currently affecting the region as well as the water crises in the capital should lead to further increases in food inflation and housing utilities inflation respectively in the coming months, helping to drive overall inflation higher.
