Category Archives: Economic Research

Economic Research

PSCE – July 2015

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PSCE Jul 01

Total credit extended to the private sector increased by N$1.0 billion, or 1.4%, in July 2015, taking total credit outstanding to N$74.1 billion. On an annual basis PSCE growth picked up from 14.8% in June to 15.9% in July, returning to longer term trend levels. A total of N$10.2 billion worth of credit has been approved over the last 12 months with N$4.7 billion worth of credit being approved in 2015 thus far. Of this N$10.2 billion worth of credit issued during the last 12 months, approximately N$5.6bn was taken up by businesses, while N$4.5bn was taken up by individuals.

PSCE Jul 02

Credit extension to households expanded by 1.5% on a monthly basis and 11.4% on an annual basis in July. Credit extension to households is now growing at a more constant pace than in the past and may start to slow as interest rate hikes start to change consumer trends. It is worth remembering however that the transmission mechanism between rate hikes and PSCE contractions is relatively slow, particularly when interest rate increases are small.

Household mortgage loans expanded by 1.5% month on month and 13.4% year on year and continue to make up the majority of credit extended to households or individuals. On a year on year basis the rate at which individuals are taking up mortgage loans has been increasing from below the average rate of private sector credit extension to households to well above it. On a year on year basis mortgage loan issuance is thus driving credit extension to individuals at present.

Year on year installment credit growth dropped to 2.2% in June after posting figures of 17.9% in April and May. In July installment credit growth was once again down at 2.2% year on year reinforcing June’s reading. Thus there has been a noticeable slowdown in the uptake of installment leases by individuals which may be attributed to tighter monetary policy by the Bank of Namibia, but needs to be confirmed by future growth rates.

PSCE Jul 03

Credit extension to corporates grew by 1.4% on a month on month basis and 22.8% year-on-year In July, meaningfully higher than the growth of credit extended to households as has been the trend for the last few years. This expansion was primarily driven by huge growth in mortgage loans, up 28.4% year on year, followed by other claims instalment credit growth of 41.7%. The rapid uptake of credit by businesses can, at least partly, be attributed to the rapid expansion of the local economy thus far as well attractive prospects going forward.

Reserves and money supply

The stock of foreign reserves decreased slightly by the end of July 2015. International reserves stood at N$14.3 billion at the end of July, down from N$14.8 billion at the end of June. The decrease from June to July, although slight, was unexpected due to the position generally benefiting from SACU and tax receipts in July.

PSCE Jul 04

Outlook

The extended period of rapid credit extension seems to be slowing around the fringes. This is to be expected as individuals and businesses adjust their expectations of future interest rates due to tightening monetary policy. Total credit extended as well as credit extension growth has been buoyed by strong wealth effects as a result of prolonged and abnormally high growth within Namibia. A slowdown in credit extension to longer term sustainable levels would be a positive development considering the current economic climate. However, the decline in reserves over the past few years is cause for concern.

New Vehicle Sales – July 2015

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A total of 1,933 new vehicles were sold in Namibia during July. New vehicle sales increased by 1.1% year on year, and increased 4% on a year to date basis, to a total of 12,936. This figure keeps Namibia on track for a record year of new vehicle sales. The 12-month cumulative measure of new vehicles sold increased slightly from 22,434 in June to 22,455 in July.

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Passenger vehicle sales fell by 13.7% month on month, from 906 in June to 782 in July. June’s sales figure was the third-highest passenger vehicle sales month of all time in Namibia. On a year to date basis, sales of new passenger vehicles grew by 2.5% to 5,768, which is the highest figure on record. Year on year sales fell by 4.5%.

Commercial vehicle sales increased by an impressive 22.6% month on month to 1,151 vehicles sold, continuing after an increase of 8.3% last month. The total number of new commercial vehicles sold this year increased by 5.3% to 7,168, on track for the best-selling year on record. Sales of light commercial vehicles increased by 18.3% month to month and 4.3% year on year, rebounding after a fall of 15% year on year last month. Medium commercial vehicle sales rose by 45.8% month on month, yet decreased by 34% year on year, and heavy commercial vehicle sales rose by 84.3% month on month and 56.7% year on year. Sales of light, medium and heavy commercial vehicles are all on track for recording-breaking years, according to year to date figures.

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The Bottom Line

Current year to date vehicle sales are at record levels for all categories measured. This is a sign of positive consumer sentiment and indicative of a growing economy. A strong consumer base supported by expansionary fiscal policy and real wage growth should see this growth trend continue, although at a slower pace due to an elevated base set last year.

 

Namibia Inflation – July 2015

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NCPI 07 2015 (0)

The Namibian annual inflation rate rose to 3.3% in July, up from 3.0% in June. On a month on month basis prices rose by 0.4% compared to 0.3% in June, largely due to a month on month increase in transport costs. On a year on year basis half the basket categories grew at a faster rate than in June while the other half slowed further. Year on year inflation is still well below average at this stage, largely due to a drop in the price of oil over the past year, and the knock on effects this has on input prices, as well as the heaviest weighted basket item (housing, water and electricity, gas and other fuels) experiencing prolonged inflation of well below the basket average. 12-Month average inflation reached a new low of 4.1%, and has been coming down steadily since November 2014.

NCPI 07 2015 (2)

On a year on year basis, food and non-alcoholic beverages prices have increased by 5.3%, up from 4.1% in June, largely due to a pickup in the rate of inflation of fish, bread and cereal, non-alcoholic beverages, mineral water, and juice prices. The effects of lower input costs due to depressed fuel prices are still flowing through to food prices. This is not likely to persist for long as poor rainfall in Namibia and South Africa, should see prices rebound the end of the year.

Year on year alcoholic beverages and tobacco price inflation slowed to 6.9% versus 7.2% in June. Tobacco price inflation slowed while alcoholic beverage prices increased at a slightly faster rate than during the previous month. Clothing and footwear inflation slowed on a year on year basis while prices have come down marginally since June. Year on year inflation on housing, water, electricity, gas and other fuels continued to slow, posting a July figure of 2.1% versus 2.5% in June. This was largely due to water supply, sewage services and refuse collection inflation slowing on a year on year basis due to base effects. Rental payments for dwellings (both owners and renters) have increased by only 1.5% on a year on year basis, and have not increased on a month on month basis.

The largest contributor to monthly inflation was the increase in transport costs which was driven by an increase in fuel prices. We feel that oil prices will continue to fluctuate for some time to come but that fuel price changes will continue to be smoothed by the Ministry of Mines and Energy and hence occur relatively infrequently.

As expected inflation picked up slightly during July while still at well below average levels. We feel that increases in the rate of inflation will continue going forward, although at a sedate pace. Cost push factors such as the depreciating currency, poor rainfall, and electricity generation issues within the region, all pointing to higher future prices.

NCPI 07 2015 (1)