WINDHOEK – The latest figures from the Namibia Statistics Agency (NSA) show that, based on the May 2019 price movements, the annual inflation rate increased to 4.1 percent compared to 3.8 percent recorded in May 2018, registering an increase of 0.3 percentage points. On a monthly basis, the inflation rate stood at -0.1 percent compared to 0.4 percent registered a monthly earlier.
According to the NSA, the annual increase resulted mainly from increases registered in: Food and non – alcoholic beverages (from 3.9 percent to 4.4 percent), education (from 9.9 percent to 12.0 percent), transport (from 5.6 percent to 7.6 percent), communications (from -0.1 percent to 1.3 percent), recreation and culture (from 2.4 percent to 4.5 percent) and hotels, cafes and restaurants (from 3.3 percent to 4.7 percent).
“With consumer income increasingly coming under pressure, it comes as no surprise that the May annual inflation print comes in lower at 4.1 percent year-on-year compared to 4.5 percent in April. As expected, transport inflation increased from 7.1 percent to 7.6 percent, with this increase attributed to pass-through effects of increased road user charges and increased pump prices. This was however countered by downside pressures on prices of other categories such as food and non-alcoholic beverages category, which, surprisingly moderated to 4.7 percent from 5.5 percent in the previous month. This was despite concerns that the persistent drought will exert upward pressures on food inflation. Similarly, the housing and alcoholic beverages and tobacco categories slowed down from 2.2 percent and 7.5 percent to 1.9 percent and 5.5 percent respectively,” commented Daniel Kavishe, FirstRand Namibia Group Economist.
Kavishe noted that core inflation however retreated to 3.3 percent from 3.5 percent a year ago which supports the inherent weakness from the demand side.
“It therefore comes as no surprise that the central bank has opted to keep interest rates accommodative at 6.75 percent. While the bank projects inflation to be contained at 4.5 percent for 2019, growth is expected to remain weak, with downside risks emanating from the prevailing drought, weak growth in neighbouring economies, and escalating global tensions weighing on commodity exports. As real sector data continues to disappoint, the MPC will be looking towards the first quarter GDP numbers for guidance regarding the effect of its current accommodative monetary policy,” Kavishe noted.
Moving forward, Kavishe expects transport inflation to slow down as cost pressures ease owing to a falling Brent crude oil price. As such, he expects overall prices to retreat in response to lower transport costs and fragile consumer demand which are likely to spill over into other inflation categories.
Meanwhile, the NSA figures show that the 12-months average annual and average monthly inflation rates from June 2018 to May 2019 stood at 4.6 percent and 0.3 percent. Corresponding rates recorded during the same period a year earlier stood at 4.7 percent and 0.3 percent respectively. For the month of May 2019, the Food and non-alcoholic beverages annual inflation rate stood at 4.4 percent compared to 3.9 percent registered during the same period last year, resulting in increase of 0.5 percentage points.
The increase in this group emanated from annual price increases recorded in the sub-groups of vegetables including potatoes and other tubers (from 5.8 percent to 13.3 percent), sugar, jam, honey, syrups, chocolate and confectionery (from -1.0 percent to 6.2 percent), bread and cereals (from 2.3 percent to 8.1 percent) and milk, cheese and eggs (from 0.2 percent to 3.9 percent). The Index for Goods and Services for the month of May 2019 stood at 137.8 and 136.3 respectively, compared to the corresponding indices of 132.9 and 130.3 recorded during the same period last year. The monthly and annual inflation rates for May 2019 for Goods stood at -0.1 and 3.7 percent, while for Services were estimated at 0.03 and 4.6 percent respectively.