Slowdown in housing prices brings inflation down slightly

Home National Slowdown in housing prices brings inflation down slightly

WINDHOEK – The Namibia Statistics Agency’s (NSA’s) latest Consumer Price Index and inflation rate estimates for the month of October 2018 indicate that the annual inflation rate slowed to 5.1 percent compared to 5.2 percent recorded in October 2017, registering a decrease of 0.1 percentage points. Based    on October 2018 price movements, the monthly inflation rate stood at 0.4 percent compared to 0.8 percent registered a month earlier. 

According to the NSA the slowdown in the annual inflation rate resulted from decelerations registered in the general price levels of housing, water, electricity, gas and other fuels (from 8.6 percent to 3.8 percent); hotels, cafes and restaurants (from 6.9 percent to 3.5 percent);  furnishing, household equipment and routine maintenance of the house (from 2.0 percent to 0.9 percent); alcoholic beverages and tobacco (from 5.7 percent to 4.9 percent); health (from 5.8 percent to 4.8 percent) and food and non-alcoholic beverages (from 3.7 percent to 3.0 percent).  

Local economist, Klaus Schade, noted that higher fuel prices have resulted in higher transport inflation and have already led to price increases for transport services and some consumer products. 

During the month of October 2018, the food and non-alcoholic beverages annual inflation rate stood at 3.0 percent compared to 3.7 percent registered during the same period last year, resulting in a slowdown of 0.7 percentage points.  The slowdown resulted from decreases recorded in the sub-groups of fish (15.2 percent to -6.5 percent); coffee, tea and cocoa from (7.1 percent to 1.0 percent); meat (from 9.2 percent to 3.4 percent); sugar, jam, honey, syrups, chocolate, confectionery (from 6.4 percent to 2.8 percent); and milk, cheese and eggs (from 3.2 percent to -0.2 percent).

The annual inflation rate for the transport group for October 2018 stood at 13.6 percent compared to 4.4 percent registered in October 2017, resulting in a significant increase of 9.2 percentage points. The increase resulted from increases witnessed in the price levels of the sub components of public transport services which increased from (0.0 percent to 18.0 percent) and operation of personal transport equipment which increased from (4.7 percent to 15.5 percent). 
The average annual and average monthly inflation rates from January 2018 to October 2018 stood at 4.1 percent and 0.5 percent.  Corresponding rates recorded during the same period a year earlier were estimated as 6.4 percent and 0.4 percent, respectively.

The highest contributors to the October 2018 annual inflation rate were transport (35.3 percent), housing, water, electricity and other fuel (21.3 percent), alcoholic beverages and tobacco (13.2 percent) and food and non-alcohol beverages (10.5 percent). The rest of the groups contributed 19.7 percent altogether.

“Second round effects of higher transportation costs due to increased input costs for producers and service providers (wholesale and retail trade outlets for instance) will support higher inflation rates in the months to come. However, there could be some relief on the horizon. Global oil prices have, despite sanctions on Iran as one of the main oil exporting countries, weakened from a spike at US$86 per barrel (4 Oct. 2018) to some US$73 per barrel in recent days,” Schade stated.  

He added that combined with a more stable exchange rate this could contain further fuel price increases even though government will try to recover losses of the National Energy Fund of close to N$500 million over the past months. 
“The inflation rate remains well within the three percent to six percent bracket that the South African Reserve Bank uses as a benchmark for its interest rate decisions. Recent wage and salary negotiations have again highlighted the limited use of the single inflation rate as a guideline for wage increments. The increase in the minimum wage for domestic workers has been criticised as being too low. The across-the-board offer at other institutions will increase inequality since the absolute increase for higher income groups exceeds the absolute increase for lower income groups. Separate inflation rates for low, middle and high-income earners would provide more accurate benchmarks for wage and salary negotiations. A separate inflation rate for low-income groups will also assist government’s decision regarding increases for social grants,” Schade concluded.