The Namibian annual inflation rate increased slightly to 3.4% in October, up from 3.3% in September. On a month on month basis prices rose by 0.2% compared to 0.1% in September. On a year on year basis, the basket categories food, alcoholic beverages, housing utilities and hotels grew at a faster rate in October than in September while the other categories slowed somewhat dragging down overall inflation. 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, as well as the heavy weighted basket items (food and non-alcoholic beverages and housing utilities) experiencing prolonged inflation below the basket average. 12 month average inflation reached a new low of 3.6%, and has been coming down steadily since November 2014.
The five basket categories that experienced accelerated annual inflation were food and non-alcoholic beverages, clothing and footwear, housing, water, electricity, gas, and other fuels, and health, as well as hotels, cafes and restaurants. Accelerating price increases in the food and non-alcoholic beverages basket category was driven by sugar, honey and confectionery prices rising relatively more quickly, followed by coffee, tea and cocoa as well as oils and fats price inflation accelerating. Faster price increases in the clothing and foot wear basket category was spread relatively evenly amongst the components of this category. All components within the housing utilities category, except water supply and sewage services contributed to the basket’s accelerating pace of inflation. Health prices experienced a price increase of 5.8% year on year and 0.4% month on month.
The transport basket category continues to be a drag on overall inflation, exhibiting year on year inflation of -2.4% and month on month inflation of -0.2%. 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 continue to expect inflation to pick up towards year end as the full benefit of cheap oil is reach 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.