NCPI – April 2018

The Namibian annual inflation rate increased marginally to 3.6% y/y in April, following the 3.5% y/y increase in prices recorded in March. Annual inflation has slowed markedly from the 6.7% recorded during April last year. On a month-on-month basis, prices increased 0.3%. Overall, prices in six of the basket categories rose at a faster annual rate than during the preceding month, four at a slower rate and two grew at a steady pace. Prices for goods rose by 3.1% y/y while prices for services grew by 4.3%.

The largest contributor to annual inflation remains Housing and utilities due to its large weighting in the basket. This category remained flat m/m for a second month and increased 3.4% y/y, contributing 1.0 percentage point towards the annual inflation figure. The regular maintenance and repair of dwellings subcategory recorded an increase in prices of 3.2% y/y, which is a faster rate of increase than the 1.7% y/y registered the previous month. On a month-on-month basis prices in this subcategory increased by 1.3%. The rest of the subcategories remained unchanged month-on-month and showed little change in price increases year-on-year.

Transport, with a weighting of about 14%, serves as the third largest basket category, accounting for 0.8 percentage points of annual inflation in April and making it the second largest contributor this month. Transport costs increased by 0.6% m/m and 5.8% y/y. Prices related to the purchases of vehicles rose by 7.3% y/y in April compared to a 6.9% y/y increase recorded in March. US president Donald Trump’s withdrawal from the Iran nuclear deal has raised concerns last week that the global supply of oil will be squeezed, pushing up the price of Brent Crude by almost 3%.

The alcoholic beverages and tobacco category showed slightly faster inflation of 4.7% y/y and 0.8% m/m. Tobacco prices increased by 0.5% y/y, while alcohol prices increased by 5.7% y/y.

Namibian annual inflation at 3.6% y/y is once again lower than that of South Africa, with South African annual inflation slowing to 3.8% y/y in March, its lowest rate in seven years. SARB Governor Lesetja Kganyago has recently said that this benign inflation environment is not expected to continue as the expectation is that the most recent reading was the low point in the current inflation cycle due to a combination of base effects and tax increases (including VAT and fuel levy increases). The currently favourable inflationary environment has contributed to a sounder macroeconomic environment, and has afforded some room for monetary policy to remain accommodative for now and help foster improved economic growth.

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