The Namibian annual inflation rate slowed to 3.8% y/y in May, with prices in the overall NCPI basket increasing by 0.3% m/m. On a year-on-year basis, overall prices in three of the twelve basket categories rose at a quicker rate in May than in April, while six of the basket categories recorded slower rates of inflation, and three of the basket categories posted steady inflation. Prices for goods increased by 5.6% y/y while prices for services rose by 1.3% y/y.
Food & non-alcoholic beverages, the second-largest basket item by weighting, continued to be the largest contributor to annual inflation, accounting for 1.2 percentage points of the total 3.8% inflation rate in May. Prices in this category increased by 0.7% m/m and 6.6% y/y. Prices in all thirteen of the sub-categories recorded increases on an annual basis, with five recording slower increases. The largest increases were observed in the prices of meat which increased by 16.9% y/y, fruit which rose by 8.5% y/y and oils and fats, which climbed by 13.5% y/y, significantly higher than the 7.5% y/y increase in April. This is the fifth consecutive month the prices of fruits subcategory recorded a slower annual price increase.
Transport was the second-largest contributor, accounting for 1.0 percentage points of annual inflation in May. Prices in the category rose 0.6% m/m and 7.3% y/y, fuelled by the operation of personal transport equipment sub-category, which rose 0.1% m/m and 13.0% y/y. This has been the result of several hikes in local fuel prices since the start of the year, due to a recovery in global oil prices from the record lows observed a year ago. Due to base effects, the public transportation services sub-category notably recorded price declines 11.6% y/y.
The alcoholic beverages and tobacco basket item was the third-largest contributor to the annual inflation rate in May, with prices increasing by 3.5% y/y. On a monthly basis, prices in this basket item fell by 0.2%. The alcoholic beverages sub-category recorded a price decrease of 0.2% m/m and 2.5% y/y. Tobacco prices rose 0.1% m/m, and 7.9% y/y.
The housing and utilities and miscellaneous categories accounted for 0.35 and 0.36 percentage points, respectively, of the total annual inflation rate in May. Price inflation for housing and utilities remained unchanged on a monthly basis, for the fourth month in a row, but rose 1.3% y/y. The regular maintenance and repair of dwellings subcategory recorded an increase in prices of 7.7% y/y. Prices in the electricity, gas and other fuels subcategory rose 1.0% y/y, while the annual inflation for rental payments stood at 1.3% y/y.
Namibia’s inflation remains relatively contained, with May recording disinflation for the first time since November last year. The current surge in Covid-19 cases in Namibia poses a concern for the economy. Overall, lower business and consumer confidence is expected to translate into muted economic growth, which should place a cap on inflation levels for the rest of the year. IJG’s inflation model forecasts an average inflation rate of 3.6% y/y in both 2021 and 2022. As uncertainty grows with the rising infections, it is unlikely that interest rates will change from 3.5% at the next SARB monetary policy committee meeting on the 22nd of July, with the Bank of Namibia likely to follow by maintaining its rate at 3.75%.
