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Annual inflation slows to 3.5%

Home Business Annual inflation slows to 3.5%

Staff Reporter

Windhoek-The annual inflation rate for March 2018 slowed down to 3.5 percent from 7 percent recorded during the same period last year, representing a slowdown of 3.5 percentage points. The annual average inflation rate (from March 2017 to March 2018) was 5.3 percent.

This March 2018 slowdown resulted from the price levels of housing, water, electricity, gas and other fuels which decreased from 9.4 percent to 3.3 percent while furnishings, household equipment and routine maintenance slowed down significantly from 7.4 percent to 0.9 percent. Other major factors were the categories of hotels, cafes and restaurants, which slowed from 8.6 percent to 3.7 percent as well as food and non-alcoholic beverages, which slowed from 7.3 to 2.7 percent, communications which went from 5.6 percent to 0.4 percent and clothing and footwear, which reduced from 2 percent to -5.7 percent.

On a monthly basis, the inflation rate remained unchanged at 0.1 percent when compared to the preceding month.
Inflation is calculated based on a basket of goods and services containing a representative sample of the goods and or services commonly consumed in a country, and weighted in accordance with the relative percentage of expenditure allotted to each of the said goods at household level. The price of these goods and services are then tracked over time, to illustrate the change in the cost of living over time.

As spending patterns change, new products and services are added to the basket, and the basket reweighted so as to better capture the current spending patterns of the consumer at the current point in time.
As such, the inflation basket is generally reconstituted every five years. In Namibia, the basket was last rebased in 2013, using household expenditure data collected in the 2009/10 Household Income and Expenditure Survey. The basket now contains over 350 items, grouped into 12 categories and 55 sub-categories, for which prices are collected on a monthly basis from more than 900 retail outlets.

Namibian inflation however, is largely determined by three categories of the overall NCPI basket, namely: (i) housing, water, electricity, gas and other fuels, (ii) food and non-alcoholic beverages and (iii) transport, which cumulatively make up just under 60 percent of the total inflation basket. Additionally, following the rebasing of the NCPI basket in 2013, “Alcoholic beverages and tobacco” make up an additional 12.6 percent of the basket, meaning that the four largest categories represent well over 70 percent of the total basket. As such, a large increase in inflation in these categories has a greater impact on the overall inflation than do increases in the lower weighted categories. Thus, it is rare to see major increases in overall inflation attributed to the lower weighted categories, despite the fact that these categories may have seen relatively high inflation in their own right.