The Namibian annual inflation rate remained unchanged at 3.0% in July. On a month on month basis, the inflation rate eased to 0.3%, as a result of slowing price increases in of food and non-alcoholic beverages as well as clothing and footwear. An equal number of CPI basket categories experienced increases and decreases in the rate of inflation on an annual basis.
On a year on year basis, food prices have increased by 4.1%, down from 4.5% in May, due partly to an elevated base. 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, coupled with fuel price increases, should see prices start to increase again in the latter half of the year.
The alcoholic beverages and tobacco category continues to see prices rise at a more rapid rate than most of the basket categories, with twelve month average inflation picking up steam during the first half of the year. Prices increased 7.2% y/y during June, more or less in line with the rate recorded in May. The inflation rate was once again the single biggest contributor to the overall rise in prices experienced during the month.
Transport and fuel prices increased 0.6% on a monthly basis, although prices are still down on an annual basis. An increase in prices was largely expected due to the increase in oil prices and the modest increase in fuel prices that followed. The normalization of oil prices at current levels should mean that fuel prices will remain relatively stable at, or near current levels.
Inflation for June came in roughly in line with our expectations but we feel that inflation will start to pick up through the remainder of the year. However, low levels of inflation in housing and utilities as well as deflation in transport prices on an annual basis should contribute to below trend levels of inflation for some months to come, and result in below average annual inflation. In the longer term, however, a pickup in annual rates is inevitable due to cost push factors such as the depreciating currency, poor rainfall, and electricity generation issues within the region, all pointing to higher future prices.