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Economic Research

New Vehicle Sales – December 2018

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732 New vehicles were sold in December, down 38.2% m/m from the 1,185 vehicles sold in November, and a decrease of 11.3% y/y from the 825 new vehicles sold in December 2017. Year-to-date 11,875 vehicles have been sold, a 9.0% contraction from December last year and the lowest annual vehicle sales figure since December 2010. Of the 11,875 new vehicles sold during the year, 5,067 were passenger vehicles, 6,147 light commercial vehicles, and 661 medium and heavy commercial vehicles.

A total of 312 new passenger vehicles were sold during December, down 20.8% m/m and 15.4% y/y. 5,067 passenger vehicle were sold in total in 2018, an 8.2% decline from 2017 and lower annual sales than the preceding seven years. Passenger vehicle sales made up 42.7% of the total number of new vehicles sold during 2018, broadly in line with the trend over the last 4 years.

Commercial vehicle sales declined to 420 units in December, a 46.9% m/m, and 7.9% y/y contraction. During the month 382 light commercial vehicles, 11 medium commercial vehicles, and 27 heavy commercial vehicles were sold. On a year-on-year basis, light commercial sales have declined by 5.0%, medium commercial sales rose by 37.5%, and heavy and extra heavy sales have declined by 41.3%. On a twelve-month cumulative basis, light commercial vehicle sales dropped 10.2% y/y, while medium commercial vehicle sales rose 8.6% y/y, and heavy commercial vehicle sales fell 8.3% y/y.

Toyota continued to lead the market for new passenger vehicle sales in 2018, claiming 33.4% of the market, followed by Volkswagen with a 28.5% share. They were followed by Hyundai and Kia at 5.8% and 5.0% respectively, while the rest of the passenger vehicle market was shared by several other competitors.

Toyota also remained the leader in the commercial vehicle space in 2018 with 56.1% market share, with Nissan in second place with an 18.8% share. Ford and Isuzu claimed 8.2% and 5.1% respectively of the number of new light commercial vehicles sold for the year. Hino lead the medium commercial vehicle category with 39.4% of sales while Scania was number one in the heavy and extra-heavy commercial vehicle segment with 35.5% of the market share during the year.

The Bottom Line

The outlook for new vehicle sales remains bleak with the cumulative number of new vehicle sales for the year amounting to 11,875, a decline of 9.0% from the cumulative number of vehicles sold in 2017 and a 47.6% contraction from the peak of 22,664 new vehicle sales recorded in April 2015. The fact that the 12-month cumulative figure is hovering around 2011 levels is a consequence of the recessionary environment we find ourselves in, characterised by depressed business and consumer confidence, as well as lower government spending. December new vehicle sales have historically been low when compared to most other months as people go on holiday and dealerships close, but 2018’s December figure was the lowest since 2008, pointing to the ongoing impact of the current recession on demand and investment.

NCPI – December 2018

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The Namibian annual inflation rate moderated to 5.1% y/y in December, following the 5.6% y/y increase in prices recorded in November. Prices in the overall NCPI basket decreased 0.2% m/m. The annual average inflation rate for 2018 was 4.3%, compared to 6.2% in 2017. On a year-on-year basis, overall prices in five of the twelve basket categories rose at a quicker rate in December than in November, with four categories recording slower rates of inflation and three categories remained unchanged. Prices for goods increased by 5.3% y/y while prices for services increased by 4.9% y/y.

Transport, the third largest basket item, was the largest contributor to annual inflation, accounting for 1.5% of the total 5.1% annual inflation rate. Prices for this basket item decreased by 1.8% m/m, but increased 10.9% y/y in December. Prices in all three sub-categories recorded increases on a year-on-year basis. Prices relating to the purchase of vehicles increased at a rate of 6.8% y/y, while prices related to public transportation services increased by 18.2% y/y due to the increases in taxi and bus fares in September.

The operation of personal transport equipment saw a price decrease of 2.8% m/m but an increase of 10.5% y/y. The month-on-month price decrease for this subcategory is a result of the cut in fuel pump prices announced by the Ministry of Mines and Energy at the beginning of December. The minister cut the price of unleaded and diesel by 100 cents per litre and 40 cents per litre, respectively, due to a decrease in the global oil price.

The price of Brent Crude oil increased by more than 20% in the first half of 2018, and hit a four-year high of US$86.29 per barrel in October. The price of oil has since fallen about 30% due to rising inventories and rapidly rising shale oil production in the US. Although the oil price has recovered somewhat from the beginning of the year, it continues to be weighted down by weaker economic growth forecasts in China.

Food and non-alcoholic beverages accounted for 0.9% of the total annual inflation rate. Food inflation is currently running at 5.2% y/y, up from the 4.7% y/y figure seen in November. The sub-categories of food and non-alcoholic beverages showed relatively low monthly increases, while six of the sub-categories showed monthly decreases. Prices of mineral waters, soft drinks and juices decreased by 1.8% m/m, while the prices of other non-alcoholic beverages declined 1.0% m/m in December. On an annual basis, prices of vegetables and fruits increased 12.8% y/y and 8.1% y/y respectively. Bread and cereal prices rose 7.9% y/y. The slow increase in meat, fish, and soft drink and mineral water prices helped keep food inflation tethered within low- to mid-single-digit levels for the year.

The Housing and utilities category was the third largest contributor to annual inflation due to its large weighting in the basket. Prices for this category remained flat m/m and increased 3.1% y/y. Prices in the electricity, gas and other fuels subcategory increased 4.9% y/y, significantly slower than the inflation of 8.7% recorded in November, due to base effects. The regular maintenance and repair of dwellings subcategory registered an increase in prices of 2.5% y/y although prices decreased by 0.7% m/m. This follows a 0.3% decrease in prices in this category in November.

The moderation in the Namibian annual inflation rate to 5.1% was somewhat expected given the cut in fuel pump prices in December. We expect transport inflation to continue its slower growth rate on an annual basis in the short-term due to the further fuel pump price cut in January, relatively low oil prices, and the stronger exchange rate. The above-mentioned factors hold true for South African inflation too and as such filter into the SARB’s Monetary Policy Committee forecasts and decisions. Relief from lower oil and fuel prices should lead to a slightly more dovish SARB, all else equal, which is likely to lead to interest rates being left unchanged later this week when the SARB MPC meets.

Local food prices might increase going forward if imports of cloven-hoofed animals and their products remain banned for some time due to the outbreak of foot-and-mouth disease in the Limpopo province in South Africa.

PSCE – November 2018

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Overall

Private sector credit extension (PSCE) rose by N$751 million or 0.8% m/m in November, compared to the N$585 million or 0.6% m/m increase recorded in October. Year-on-Year, PSCE grew by almost 8.0% in November compared to 7.8% y/y in October. November has also been the fourth consecutive month in which PSCE growth has kept rising on a year-on-year basis. Cumulative private sector credit outstanding as at the end of November amounted to N$96.645 billion. On an annual basis, households were taking up much of the credit extended to the private sector in 2018, accounting for almost two-thirds of the uptake. However, that wide disproportion between credit extended to households and corporations began to narrow in August. On a rolling 12-month basis N$7.126 billion worth of credit was extended to the private sector with N$3.26 billion being taken up by households. Corporations very nearly equaled that which was extended to households by taking up N$3.21 billion worth of the credit over the last 12-months, while claims on non-residents totaled N$663.2 million.

Credit extension to individuals

Credit extended to individuals increased by 6.1% y/y in November, moderating from the 7.0% y/y increase recorded in October. The year-on-year slowdown in household credit extension was due to moderating growth in mortgages, overdrafts, installment credit and other claims. Mortgage loans increased by 6.9% compared to 8.0% a year ago, while overdrafts increased by just 0.9% versus 8.5% in the prior year. Installment credit contracted by 6.8%, worse than the 2.6% contraction registered during the corresponding period in 2017. On a monthly basis, household credit growth printed flat following a modest increase of 0.7% m/m recorded in October. Mortgage credit contracted by 0.3% m/m along with a 0.9% contraction in installment credit. Other loans and advances increased by 2.1% m/m followed by a 0.4% m/m increase in overdrafts. Leasing transactions increased the most in the household’s category, 14% m/m, although significantly slower than the 70.3% m/m growth registered in October.

Credit extension to corporates

Credit extension to corporates increased by 8.9% y/y compared to October’s 7.1% y/y increase. The November increase in corporate credit has been the highest since March 2017 and the fifth consecutive month in which corporate credit has been increasing at a faster pace on a year-on-year basis. Shorter-term credit facilities continue to be driving the increase in corporate credit extension. Other loans and advances increased by 28.2% y/y and overdrafts increased by 18.5% y/y. Mortgage loans to businesses increased by 5.6% y/y in November, slowing from the 8.5% y/y increased recorded the corresponding period in 2017. On a monthly basis credit extended to businesses was the main reason for the overall increase in PSCE. Corporates made use of overdraft facilities in November, increasing overdraft loans by 8.9% m/m, followed by corporate mortgage lending which increased by 4.9% m/m.

Banking Sector Liquidity

The overall liquidity position of commercial banks declined by N$1.1 billion to reach an average of N$2.3 billion during November from N$3.4 billion in October. Bank of Namibia attributes the decline in liquidity to foreign currency outflows as a result of trade-related payments.

Reserves and money supply

As per BoN latest money statistics release, broad money supply increased by N$7.24 billion or 7.4% y/y in November but decreasing 1.7% m/m by N$1.87 billion. Foreign reserve balances declined by N$1.56 billion to N$29.5 billion in November from N$31.1 billion in October, representing a 5.0% m/m fall in reserves. BoN attributes the decline in reserves to net capital outflows from commercial banks to fund foreign currency purchases, in addition to an interest payment for the US$500 million Eurobond. A stronger Namibian dollar versus the US dollar during the period under review further contributed to the decline in foreign reserves.

Outlook

Overall PSCE growth in November maintained its upward momentum on a year-on-year basis for a fourth consecutive month, increasing by 7.96% y/y. The highest rate of growth in the last 18 months. The year 2018, with the omission of pending December PSCE data, has seen very little deleveraging from both consumers and businesses. In the midst of recessionary economic growth short-term and unsecured loans have grown at a quicker rate than that of mortgage and instalment credit. From a 12-month rolling perspective household demand for credit underpinned growth in PSCE and only until recently have businesses started borrowing more. The increase in corporate credit, however, has been more profound in short-term borrowings.

The Bank of Namibia (BoN) has been accommodative in terms of monetary policy by keeping the repo rate steady at 6.75% since cutting by 25bps in August 2017. How long BoN manages to keep interest rates steady will depend largely on developments in South Africa. The SARB will closely monitor inflation, which ticked up to 5.2% y/y and is expected to moderate on the back of falling oil prices and moderating transport inflation. Furthermore, the SA economy broke out of a recession and the outlook for possible rate hikes is now pushed towards the latter part of 2019. Domestically, BoN will be weary of worsening economic conditions, projecting weaker growth in its December Economic Update. BoN expects the Namibia economy to contract by 0.2% in 2018 followed by growth of 1.5% in 2019, a downward revision from its 1.9% estimation in July 2018 and more than half of the 3.1% it estimated in December 2017.