The Namibian annual inflation rate remained unchanged at 5.2% y/y for a third consecutive month. Prices increased by 0.2% m/m. Prices for food and non-alcoholic beverages, which was largely the driving force behind the moderation in annual inflation, continued to increase at slower pace in December. On a year on year basis, overall prices in five of the twelve basket categories rose at a quicker rate in December, with five categories recording slower rates of inflation and two categories remained unchanged. Prices for goods increased by 3.1% y/y while prices for services increased by 8.0% y/y. This was also unchanged from the increases recorded in November.
Housing and utilities contributed towards more than half of the annual inflation figure of 5.2% in December. This is also the largest basket item due to its weighting. This category remained relatively flat month-on-month, increasing only 0.5% and increasing 9.2% y/y. Year-on-year price increases within the subcategories showed little change from those recorded in November, with the one exception being price increases for electricity and other fuels of 8.3% y/y in December, up from 4.6% y/y in November. This follows two consecutive months of fuel pump price increases in November and in the beginning of December, which have contributed to the faster rate of increase in the prices of this subcategory. Prices for regular maintenance and repair of dwellings increased by 0.2% m/m.
Transport, with a weighting of about 14%, serves as the third largest basket item. Accounting for 0.9% of annual inflation in December and making it the second largest contributor. Prices for transport rose by 6.7% y/y, marginally quicker than the increase of 6.1% y/y recorded in November. Prices related to the purchases of vehicles increased at a slower pace in December, rising by 6.8% y/y compared to 7.5% y/y increase in November.
The alcoholic beverages and tobacco category showed slower increases of 4.6% y/y and contracted 0.7% m/m, compared to increases of 5.4% y/y and 0.3% m/m in November. Tobacco prices increased by 4.1% y/y, while alcohol increased at 4.7% y/y.
Namibian annual inflation averaged 6.2% for the year 2017, having moderated throughout the course of the year due largely to the slowdown in food inflation. South African inflation has remained well contained within the SARB’s target band and is most likely set to report December data still within that range. Although buoyed by a strengthening currency, short term risks to the upside for inflation are ever present. There has been a rally in the price of oil since mid-December and does present a case for an increase in the prices of imported goods. Further risks to an uptick in inflation exist in the imminent decision from Moody’s review on SA’s sovereign credit rating. This decision will be preceded by a February budget that, amongst others, could include details on how the newly approved free higher education will be funded. A disappointing budget preceded or followed by a possible downgrade will lead to a fallout from major global bond indices, resulting in a weaker currency and definite inflationary pressures.
The Namibian annual inflation rate remained at 5.2% y/y in November, unchanged from October. Prices increased by 0.3% m/m. Prices for food and non-alcoholic beverages, which has largely been the reason for the slowdown in annual inflation, continue to increase at slower pace. On a year on year basis, overall prices in three of the twelve basket categories rose at a quicker rate in November than in October, with five categories recording slower rates of inflation and four categories remained unchanged. Prices for goods increased by 3.1% y/y while prices for services increased by 8.0% y/y. This was also unchanged from the increases recorded in October.
Housing and utilities was the largest contributor to annual inflation by weighting, this is also the largest weighted basket item. This category remained flat m/m and increased 8.6% y/y, contributing 2.4% towards the annual inflation figure. Year-on-year price increases within the subcategories showed little change from those recorded in October, with one of the exceptions being price increases for electricity and other fuels of 4.6% y/y in November, up from 4.1% y/y in October. This follows fuel pump price increases in November of 40 cents per litre of petrol and 60c per litre of diesel. Prices for regular maintenance and repair of dwellings contracted by 0.1% m/m.
Transport contributes about 14% towards annual inflation, and as serves as the third largest basket item by weighting. Transport accounted for 0.8% of annual inflation in November, making it the second largest contributor this month. Prices for transport rose by 6.1% y/y, a faster increase in prices than the 4.1% y/y rise recorded in October. Prices related to the purchases of vehicles rose by 7.5% y/y in November compared to a 6.5% y/y increase in October.
The alcoholic beverages and tobacco category showed increases of 5.4% y/y and 0.3% m/m, compared to increases of 5.7% y/y and 1% m/m in October. Tobacco prices increased by 6.0% y/y, while alcohol increased at 5.3% y/y.
Namibian annual inflation, although higher than that of South Africa, has been slowing since the start of this year. South African inflation has, since April this year, remained within the SARB’s target band at 4.6% y/y in November following 4.8% y/y in October. The SARB, being an inflation targeting central bank, kept rates unchanged at its November MPC meeting whilst pointing out that there are upside risks to their inflation forecast. The SARB cited higher international oil prices and a weaker rand exchange rate as reasons not to cut rates, while expecting inflation to remain within the target range in the near term. The outcomes of the ANC electoral conference and Moody’s review decision later in 2018 could have a significant impact on the rand. Adverse outcomes from these two events will most likely trigger capital outflows. Weak economic growth locally as well as regionally, and a slowdown in inflation, provided plenty of cause to expect rate cuts in 2017. This was not to be and the year will end with only one rate cut of 25 basis points exercised in July and August by the SARB and BoN respectively. At present South Africa looks set to enter 2018 with expectations of interest rate hikes which will be emulated by BoN should they transpire.
Annual inflation has slowed to 5.2% y/y in October, following a rise in prices of 5.6% y/y in September. Slower increases in the prices of food and non-alcoholic beverages, in addition to contracting prices for clothing and footwear contributed towards annual inflation rising at a slower rate in October. On a year on year basis, prices in three of the twelve basket categories rose at a quicker rate in October than in September, with six categories recorded lower rates of inflation, while the rate of inflation in three categories remained unchanged. Prices for goods rose by 3.1% y/y while prices for services increased by 8.0% y/y.
Housing and utilities, the largest contributor to annual inflation by weighting, recorded an increase in inflation of 8.6% y/y and a decline 0.1% m/m in October. The electricity and other fuels subcategory recorded an increase in prices of 4.1% y/y, which is a slower rate of increase compared to 6.0% registered the previous month. On a m/m basis prices in this subcategory contracted by 0.4%. Consumers were spared a fuel price increase during October and we expect prices to come under pressure following a fuel pump price increase in November and December at 40 cents and 50 cents respectively.
Food and non-alcoholic beverages contributed about 17% towards annual inflation. One of the major reasons for the slowdown in inflation this year has been the continued moderation in food inflation. Prices in this category rose by 3.7% y/y, lower than the 4.2% recorded in September. Prices for bread and cereals contracted by 2.7% y/y while prices for fish and meat rose by 15.2% and 9.2% respectively.
Alcoholic beverages and tobacco, the third largest category, saw prices increase 5.7% y/y compared to an increase of 6.0% in October of 2016. Prices of alcoholic beverages rose 5.5% y/y while tobacco prices accelerated by 6.4% y/y. Transport prices rose by 4.4% y/y and 0.6% m/m. Prices related to the purchases of vehicles rose by 6.5% y/y in October compared to 3.9% y/y increase in September.
South African inflation rose 4.8% in October following a 5.1% increase in September. The SARB kept its benchmark rate unchanged at 6.75%, having cut rates for the first time in five years in July this year. Escalating uncertainties in the economy as well as potential upside risks to inflation were cited as reasons to the latest decision to keep rates unchanged. Though annual inflation remains within the SARB’s target band, concerns remain that the rand was sensitive to political developments and weak economic growth prospects. The ratings downgrade of South Africa’s local currency to “junk” from S&P Global Ratings sent the rand tumbling. This was however offset by Moody’s decision to place South Africa on review. A ratings downgrade from Moody’s will effectively push South Africa out of major global bond indices, resulting into large capital outflows that will have significant bearing on inflation. Namibia’s foreign currency rating was recently cut to “junk” by Fitch ratings on the back of a mid-year budget review that was tainted by expenditure over-runs, disappointing revenues and escalating debt to GDP levels. Future debt issuance will most likely become more expensive as a result, especially in international capital markets. Though inflation has been