WINDHOEK – This year opened with the annual inflation rate at 4.7 percent, which was a 1.1 percentage point higher than the 3.6 percent registered in January 2018. However, this is still lower than 5.1 percent in December 2018 and 5.6 percent in November 2018.
The most recent figures from the Namibia Statistics Agency indicate that during January 2019 annual price levels of Education (12.0 percent), Transport (7.3 percent), Alcoholic beverages and tobacco (6.4 percent) and Food and non-alcoholic beverages (5.7 percent) were the main drivers of the annual inflation rate.
“The drop in the inflation rate brings another relief to consumers as well as the business sector. The contraction in the economy certainly helped contain rental price increases at levels last seen in 2015. Lower global oil prices contributed further to the lower inflation rate. However, not all households will benefit to the same extent from the slowdown in price increases. Poor households that spend most of their income on food, and a lower share than the average household on transport and rent in particular in rural areas, will struggle more to make ends meet,” commented local economist, Klaus Schade.
He continued that due to the existing dry spell, he expects food prices to remain under pressure while further price increases for alcoholic beverages and tobacco products can be expected this month with the annual increase in excise duties.
“Despite upward price pressure in some categories, inflation is expected to remain well within the 3 percent to 6 percent band targeted by the South African Reserve Bank. Therefore, and given the economic climate, interest rate increases are unlikely this year,” said Schade.
The inflation increase was also significantly fuelled by Food and non–alcoholic beverages, which increased from 2.0 percent to 5.7 percent, Clothing and footwear (from -3.3 percent to -0.7 percent), Education (from 10 percent to 12 percent), Furnishings, household equipment and routine maintenance of the house (from -0.9 percent to 1.7 percent) and Alcoholic beverages and tobacco (from 4.2 percent to 6.4 percent).
The twelve months average annual and average monthly inflation rates from February 2018 to January 2019 stood at 4.4 percent and 0. 4 percent. The corresponding rates registered during the same period of the previous year stood at 5.8 percent and 0.3 percent respectively. On a fiscal year to date (April 2018 to January 2019) the average annual and average monthly inflation rates to date were estimated as 4.6 percent and 0.4 percent. On a monthly basis, the inflation rate increased to 1.2 percent up from -0.2 percent registered in the previous 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 is reweighted so as to better capture the current spending patterns of the consumer at the current 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 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.