The Namibian annual inflation rate remained unchanged at 2.1% y/y for a third consecutive month. Prices increased by 0.2% m/m, as inflationary pressures remain muted. On an annual basis, prices in three of the twelve basket categories rose at a quicker rate in July than in June. Two categories remained unchanged, while the rate of price increases in seven categories slowed for the month of July. Prices for goods rose by 2.4%, while prices for services increased by 1.6%.
Food & non-alcoholic beverages, the second largest basket item by weighting, continued to be the largest contributor to annual inflation, accounting for 1.1 percentage points of the total 2.1% inflation rate. Prices in this category increased by 0.7% m/m and 6.1% y/y. Prices in all thirteen sub-categories recorded increases on a year-on-year basis, with the largest increases being observed in the prices of fruit which increased by 14.7% y/y and vegetables which increased by 14.0% y/y. The prices of meat products recorded a faster increase in prices for seven consecutive months on an annual basis, increasing by 10.6% y/y in July.
The alcoholic beverages and tobacco basket item was the second largest contributor to the annual inflation rate in July, with prices of the basket item increasing by 0.8% m/m and 4.5% y/y. Prices for alcoholic beverages increased at a rate of 0.8% m/m and 4.4% y/y, while tobacco prices rose by 0.7% m/m and 4.6% y/y.
The education basket recorded inflation of 7.0% y/y, with the cost of pre-primary education growing at a rate of 5.6%. Primary and secondary education recorded price increases of 9.3% y/y, while tertiary education prices rose by 5.3% y/y. None of the three subcategories printed price increases on a month-on-month basis.
Zonal data shows that on a monthly basis prices increased by 0.2% in the northern zone 1, 0.3% in the central zone and remained steady in the mixed eastern, southern and western zone. On an annual basis, Windhoek and surrounding area, in zone 2, recorded the highest inflation rate at 2.5%, with the mixed zone 3 recording the lowest rate of annual inflation at 1.4%. Inflation in zone 2 (the northern region) slowed to 2.1% y/y.
We expect the Namibian inflation rate to have more or less troughed in the last couple of months. Despite inflationary pressure generally remaining very muted, we do expect a bit of an uptick in Namibian inflation in August after an increase in global oil prices led the Ministry of Mines and Energy to increase the prices of petrol and diesel by 100 cents per litre and 70 cents per litre, respectively, in the beginning of the month. We could see further increases in fuel prices during the rest of the year, depending on the recovery in global oil demand and the exchange rate. Despite the expected acceleration in Namibian inflation, we believe that inflationary pressure will remain relatively contained and that there will be enough room for the Bank of Namibia to cut interest rates further, by between 25-50 basis points at its August monetary policy meeting. IJG’s inflation model forecasts an average inflation rate of 2.1% y/y in 2020 and 3.5% in 2021.
