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Home / Upward pressure expected to remain as inflation continues to rise

Upward pressure expected to remain as inflation continues to rise

2018-08-17  Staff Reporter

Upward pressure expected to remain as inflation continues to rise

WINDHOEK - Continuous upward pressure is expected on inflation, mostly owing to the rising fuel prices, the most recent of which was a 25 cents per litre increase in August, attributed to the adjustment of the fuel tax in August. Although international oil prices have eased slightly, the prevailing sentiment is that the depreciation of the Namibia Dollar will increase the cost of oil in domestic currency which could result in further under-recoveries, meaning the actual costs of fuel are still higher than the pump price.

“If not fully or partly absorbed by the National Energy Fund as in the previous months, under recoveries will lead to fuel price increases. In addition, the municipality has increased bus fares, which will add further pressure on transportation costs,” noted Klaus Schade, Research Associate at the Economic Association of Namibia.

The Namibia Statistics Agency’s most recent Consumer Price Index (CPI) for July 2018, which was released this week, indicates that the annual inflation rate increased from 4.0 percent in June to 4.5 percent in July 2018. On a month-to-month basis, inflation accelerated from 0.2 percent in June to 0.5 percent in July. The inflation rate for July 2018 is the highest so far for 2018, but remains below the inflation rate of 5.4 percent in July 2017 and overall below the inflation rates for 2016 and 2017.
“Contrary to previous months, the inflation rates for both goods and services moved upward. The main driver of inflation was, however, the price increase for goods. The inflation rate for goods rose to 4.6 percent from 3.8 percent in June and exceeded for the first time since December 2016 the inflation rate for services that rose from 4.2 percent in June to 4.3 percent in July,” Schade noted in his commentary on the latest CPI figures.

The latest CPI shows that food price inflation slowed down from 4 percent in June to 3.2 percent in July 2018, which was also below food price inflation in July 2017 of 4.3 percent. Price increases for bread and cereals, which account for 51 percent of the food inflation and hence determine its direction, halved from 3.1 percent in June to 1.5 percent in July and the inflation rate for meat dropped from 6.9 percent to 5.1 percent.

Schade also note that for the first time since June 2012, prices for dairy products actually contracted in July by 0.6 percent compared to an increase by 0.8 percent in the previous month. Prices for fruits and for vegetables rose faster than in previous months, namely by 12.7 percent and 8.0 percent respectively compared to 12.4 percent and 6.1 percent. Prices for sugar, jam etc. continued to contract in July by 1.1 percent compared to a contraction by 1.2 percent in June.

Prices for alcohol and tobacco products also continued their climb and increased by 6.8 percent in July, which was the highest inflation rate in two years. The rising inflation rate was caused by price increase of 7.5 percent for alcoholic beverages, while the inflation rate for tobacco products eased from 4.1 percent in June to 3.6 percent. The inflation rate for housing, water and electricity – the items that account for the largest share in the consumption basket (28.4 percent) – accelerated to 3.7 percent in July from 3.2 percent in June.

“Future maize prices have eased slightly in July compared to June on a monthly average, but are on the increase again, while wheat prices continue to increase. However, monthly average wheat prices are below pricing of a year ago. Maize prices, on the other hand, exceed price levels last year. Hence, food price inflation is expected to remain at the current level,” Schade concluded.


2018-08-17  Staff Reporter

Tags: Khomas
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