The Namibian annual inflation rate decreased slightly to 3.3% in November, down from 3.4% in October. On a month on month basis prices rose by 0.2% again when compared to October. On a year on year basis, the basket categories food and non-alcoholic beverages, health and communication grew at a faster rate in November than in October while the other categories slowed somewhat dragging down overall inflation, with transport and clothing prices contracting. Year on year inflation is again well below average, largely due to a drop in the price of oil over the past year, and the knock on effects this has on prices. 12 month average inflation reached a new low of 3.5%, and has been coming down steadily since November 2014.
The three basket categories that experienced accelerated annual inflation were food and non-alcoholic beverages, health and communication. Accelerating price increases in the food and non-alcoholic beverages basket category was largely driven by fruit and vegetables prices rising relatively more quickly, followed by mineral water, soft drinks and juices as well as oils and fats and bread and cereals price inflation accelerating. The food price increases could largely be ascribed to the drought currently experienced in Namibia and South Africa. Health prices experienced a price increase of 5.8% year on year and 0.4% month on month
The only two categories that experienced price contractions on an annual basis were clothing and foot wear and transport, however, transport deflation decreased at a slower pace when compared to October. Price decreases in the clothing and foot wear basket category was spread relatively evenly amongst the components of this category.
The transport basket category continues to be a drag on overall inflation, exhibiting year on year inflation of -1.6% and month on month inflation of 0.02%. Transport is the third largest basket category by weighting and as such has a large impact on overall inflation. The deflation experienced by this basket category is largely due to the operation of personal transportation equipment becoming less expensive. Prolonged lower fuel prices due to the oil rout have provided consumers with some respite worldwide and to a large extent in Namibia. The effects of cheap transportation flow through to many other basket categories and in this way contributes to lower overall inflation.
We expect inflation to remain low for the rest of the year as oil prices fell further during December. However, we expect inflation to pick up in the first half of 2016 as the full benefit of cheap oil is reached and the weak currency causes 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.