NCPI – November 2017

The Namibian annual inflation rate remained at 5.2% y/y in November, unchanged from October. Prices increased by 0.3% m/m. Prices for food and non-alcoholic beverages, which has largely been the reason for the slowdown in annual inflation, continue to increase at slower pace. On a year on year basis, overall prices in three of the twelve basket categories rose at a quicker rate in November than in October, with five categories recording slower rates of inflation and four 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 October.

Housing and utilities was the largest contributor to annual inflation by weighting, this is also the largest weighted basket item. This category remained flat m/m and increased 8.6% y/y, contributing 2.4% towards the annual inflation figure. Year-on-year price increases within the subcategories showed little change from those recorded in October, with one of the exceptions being price increases for electricity and other fuels of 4.6% y/y in November, up from 4.1% y/y in October. This follows fuel pump price increases in November of 40 cents per litre of petrol and 60c per litre of diesel. Prices for regular maintenance and repair of dwellings contracted by 0.1% m/m.

Transport contributes about 14% towards annual inflation, and as serves as the third largest basket item by weighting. Transport accounted for 0.8% of annual inflation in November, making it the second largest contributor this month. Prices for transport rose by 6.1% y/y, a faster increase in prices than the 4.1% y/y rise recorded in October. Prices related to the purchases of vehicles rose by 7.5% y/y in November compared to a 6.5% y/y increase in October.

The alcoholic beverages and tobacco category showed increases of 5.4% y/y and 0.3% m/m, compared to increases of 5.7% y/y and 1% m/m in October. Tobacco prices increased by 6.0% y/y, while alcohol increased at 5.3% y/y.

Namibian annual inflation, although higher than that of South Africa, has been slowing since the start of this year. South African inflation has, since April this year, remained within the SARB’s target band at 4.6% y/y in November following 4.8% y/y in October. The SARB, being an inflation targeting central bank, kept rates unchanged at its November MPC meeting whilst pointing out that there are upside risks to their inflation forecast. The SARB cited higher international oil prices and a weaker rand exchange rate as reasons not to cut rates, while expecting inflation to remain within the target range in the near term. The outcomes of the ANC electoral conference and Moody’s review decision later in 2018 could have a significant impact on the rand. Adverse outcomes from these two events will most likely trigger capital outflows. Weak economic growth locally as well as regionally, and a slowdown in inflation, provided plenty of cause to expect rate cuts in 2017. This was not to be and the year will end with only one rate cut of 25 basis points exercised in July and August by the SARB and BoN respectively. At present South Africa looks set to enter 2018 with expectations of interest rate hikes which will be emulated by BoN should they transpire.

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