NCPI – December 2017

The Namibian annual inflation rate remained unchanged at 5.2% y/y for a third consecutive month. Prices increased by 0.2% m/m. Prices for food and non-alcoholic beverages, which was largely the driving force behind the moderation in annual inflation, continued to increase at slower pace in December. On a year on year basis, overall prices in five of the twelve basket categories rose at a quicker rate in December, with five categories recording slower rates of inflation and two categories remained unchanged. Prices for goods increased by 3.1% y/y while prices for services increased by 8.0% y/y. This was also unchanged from the increases recorded in November.

Housing and utilities contributed towards more than half of the annual inflation figure of 5.2% in December. This is also the largest basket item due to its weighting. This category remained relatively flat month-on-month, increasing only 0.5% and increasing 9.2% y/y. Year-on-year price increases within the subcategories showed little change from those recorded in November, with the one exception being price increases for electricity and other fuels of 8.3% y/y in December, up from 4.6% y/y in November. This follows two consecutive months of fuel pump price increases in November and in the beginning of December, which have contributed to the faster rate of increase in the prices of this subcategory. Prices for regular maintenance and repair of dwellings increased by 0.2% m/m.

Transport, with a weighting of about 14%, serves as the third largest basket item. Accounting for 0.9% of annual inflation in December and making it the second largest contributor. Prices for transport rose by 6.7% y/y, marginally quicker than the increase of 6.1% y/y recorded in November. Prices related to the purchases of vehicles increased at a slower pace in December, rising by 6.8% y/y compared to 7.5% y/y increase in November.

The alcoholic beverages and tobacco category showed slower increases of 4.6% y/y and contracted 0.7% m/m, compared to increases of 5.4% y/y and 0.3% m/m in November. Tobacco prices increased by 4.1% y/y, while alcohol increased at 4.7% y/y.

Namibian annual inflation averaged 6.2% for the year 2017, having moderated throughout the course of the year due largely to the slowdown in food inflation. South African inflation has remained well contained within the SARB’s target band and is most likely set to report December data still within that range. Although buoyed by a strengthening currency, short term risks to the upside for inflation are ever present. There has been a rally in the price of oil since mid-December and does present a case for an increase in the prices of imported goods. Further risks to an uptick in inflation exist in the imminent decision from Moody’s review on SA’s sovereign credit rating. This decision will be preceded by a February budget that, amongst others, could include details on how the newly approved free higher education will be funded. A disappointing budget preceded or followed by a possible downgrade will lead to a fallout from major global bond indices, resulting in a weaker currency and definite inflationary pressures.

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