Category Archives: Economic Research

Economic Research

Namibia CPI – March 2015

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Namibian annual inflation eased further to 3.4% in March, from 3.6%in February. On a monthly basis weighted prices rose by 0.4%. The majority of CPI basket categories saw rates of inflation fall on an annual basis, with alcoholic beverages & tobacco, furniture, health and hotels being the only categories that experienced year on year increases in the rate of inflation during March. On a monthly basis the categories experienced price increases across the board contributing to anoverall increase in prices for the month.

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Transport prices continued to contract, down 3.7% during March after falling2.9% in February. Within the basket category, operation of personal transportation equipment, was the only subcategory to experience a decline. The two remaining categories, purchases of vehicles and public transportation services, experienced relatively steady price growth. The deflation experienced in operation of personal transport equipment is due to the further decrease in fuel prices in February and remained unchanged in March, driven by current low oil prices. However, fuel prices have been increased by the Ministry of Mines and Energy during April, and one might see transport inflation to retrace in the April figures.

The alcoholic beverages and tobacco category continues to see prices rise at a more rapid rate than most of the basket categories. Prices increased 8.6% y/y during March up from 7.7% in February and was the single biggest contributor to the overall rise in prices experienced during the month. It is not likely to experience much slowdown going forward due to South Africa raising sin taxes, which flowed through to Namibia during their last budget announcement.

Food and non-alcoholic beverages inflation eased from 6.6% in February to 5.5% in March. Price increases in this category were mainly observed in the sub components of sugar, honey, jams (up 3.3%), vegetables (up 2.7%), oils and fats (up 1.4%), soft drinks and juices (up 0.9%) and fruit (up 0.6%). The lag between the drop in fuel prices and food inflation slowing tends to be between seven and eleven months and as such should start kicking in before the second half of the year.

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While we expected inflation to slow further in March, we expect inflation to normalise somewhat in April with prices growing in the latter half of the year. Low fuel prices should see food and non-alcoholic beverage inflation slowing towards June due to the lagged transmission mechanism. This together with the depressed levels of inflation in housing, transport, and various other basket categories should see inflation at or near these low levels for the next few months. However the current drought in South Africa and lack of rain in large parts of Namibia resulting in losses in agricultural production, as well as Namibia and South Africa raising fuel prices could see surprises to the up-side. The current weak rand will have an inflationary effect on imported goods which will add to any upside surprises in the coming months.

 

Vehicle Sales – March 2015

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A record 2,150 new vehicles were sold in Namibia during March, up 10.4% m/m and 14.4% y/y. This comes off a high base as both February 2015 and March 2014 saw elevated sales levels, March 2014 also being a record month at the time. Month on month passenger vehicle sales rose by 10.8% after being up 10.4% in February to a record 910 units sold. On a year on year basis only 2 more passenger vehicles were sold than in March 2014 although the base month experienced exceptionally high sales. Commercial vehicle sales came close to record levels as well with month on month sales increasing by 10.1% and year on year sales increasing by 27.7%. As is expected during the record sales month the 12 month cumulative vehicle sales is up a further 1.2% to 22,590. Year to date new vehicle sales amount to 5,813, 12.3% up from last year’s already high base.

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Once again Toyota and Volkswagen dominated the passenger vehicle market, claiming 57.8% between them. 36.5% of all passenger vehicles sold during March were Toyotas while Volkswagen made up 21.3% of the market. Nissan gained some market share and captured 5.6% of the March passenger vehicle sales while Kia lost some market share.

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The light commercial vehicle segment breached the 1,000 vehicles sold level for the 6th time within the year as 1,087 vehicles were sold in March, up 6.3% m/m. This space was also dominated by Toyota with more than 50% market share. Nissan captured almost 20% of the market share with the 20 other manufacturers sharing the remaining 30%. A record total of 93 heavy commercial vehicles were sold during March, up 19.2% m/m. 60 medium commercial vehicles were sold, another record, up 140% m/m from a low base.

The Bottom Line

The strong increase in vehicle sales is attributed to a number of factors, namely the on-going expansive fiscal and monetary positions of the Ministry of Finance and Bank of Namibia, as well as purchase of vehicles by Government.The Ministry of Finance has allocated N$984.5m to vehicle purchases in the 2014/15 National Budget, this is N$517.8m or 111.0% more than what was spent on vehicles during the previous financial year. With the financial year ending in March is possible that government has spent any under-allocation of this budget during the month propping up the sales statistics. It is not unusual for March to be a record month due partially to the government year-end.

Continued spending by the mining sector has helped drive vehicle sales during the past year while real wage growth and the strong local economy have bolstered sales. The strong state of the Namibian consumer can thus be well illustrated by vehicle sales figures. However as no cars are manufactured in Namibia, all new vehicles sold must be imported. Given the small, open, nature of the Namibian economy, this puts major pressure on the country’s balance of payments, which pressure cannot be sustained long-term. April vehicle sales are expected to be lower than March due in part to the high base and historically April sales are softer.