The Namibian annual inflation rate increased to 6.5% in March, up 0.4 percentage points from 6.1% in February. On a month on month basis, prices continued to rise, up 0.8% after the 0.6% uptick seen last month. On a year on year basis, six of the twelve basket categories grew at a slower rate in March than in February while the other half accelerated, pushing up overall inflation. The biggest contributor to inflation on a monthly basis were price increases of food and non-alcoholic beverages, while on an annual basis it was housing utilities price increases.
The two heavy weighted categories in the basket that experienced accelerated annual inflation were food & non-alcoholic beverages and housing utilities. Food and non-alcoholic beverages inflation was driven by the price increases across the majority of the sub-components, with only soft drinks & juices, non-alcoholic beverages and vegetables prices rising relatively less quickly. The food price increases can largely be ascribed to the drought currently experienced in Namibia and South Africa as is reflected by price increases of fruit, meat and grain products such as bread & cereals.
The annual inflation rate for the category housing, water, electricity, gas and other fuels increased from 7.4% in February to 7.5% in March, contributing 2.1 percentage points to annual inflation. Accelerating price increases in this category was largely driven by electricity, gas and other fuels which increased to 8.9% in March, up from 8.6% in February.
Transport is the third largest basket category by weighting and as the price of transportation flow through to many other basket categories, it has a large impact on overall inflation. The annual inflation rate for the transport basket category slowed down slightly to 4.3% in March down from 4.7% in February. However, we expect to see higher inflation as the effects of the drop in the price of oil over the past year and the knock on effects thereof wear out.
In conclusion, we expect inflation to accelerate further in 2016 as the full benefit of cheap oil has worn out with the weak currency causing import prices to rise. Looming drought conditions as well as increasing utilities costs should further see inflation pick up in basket categories such as food and non-alcoholic beverages, and alcoholic beverages and tobacco and housing.