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Inflation falls on account of transport

Transport and food have impacted inflation for the month of October, resulting in slowed growth by 0.3 percentage points according to IJG Securities, who released its inflation numbers earlier in the week.
“Annual inflation for October slowed to 5% as compared to 5.3% recorded a month earlier. On a monthly basis, the inflation rate increased to 0.2%. The annual decline in inflation was primarily on account of base effects, with food inflation continuing to slow and transport prices remaining unchanged month-on-month. Housing utilities, the largest weighting in the Consumer Price Index basket, also saw no growth during October,” said IJG.
Said IJG, “Education has surpassed food and non-alcoholic beverages as basket category with the highest inflation, with the cost of tertiary education continuing to grow at a rate of 9.8% per year. The rate of growth of food and non-alcoholic beverage prices has declined for the past 5 months, whereas the cost of alcoholic beverages and tobacco continues to grow at an increasing pace.”
According to IJG, the communications category is the only category that experiences price declines year on year. Said IJG, “The communications category continues to see prices decrease year on year (down 1.1%), and is thus the only category of expenditure seeing actual price declines. The decline in communications prices is a direct result of the low interconnection rates between operators within the country. The increased use of internet based communication has added further competition within the sector which has contributed to the decrease in prices.”

“Decreases in the global oil price are expected to filter through to the consumer in two parts over the next 18 months. First round effects should be felt in the next two months as fuel pump prices decline, while second round effects are expected to have a price-reducing effect on food prices 8-18 months out,” IJG said.
IJG expects inflation to average 5.4% for 2014, thus revising its forecast. “On account of falling oil prices, we have revised our forecast average inflation for 2014 to 5.4% in 2014, down from previous forecasts of 5.7%,” said IJG. Rounding of its report, IJG said, “We maintain our view that demand-factors are starting to lead inflation in Namibia, as strong growth in the economy with rural urban migration contributing to demand driven increases in prices. Administered and services prices are especially prone to increases caused by these effects. Recent unrest about the cost of housing is not likely to have a long term effect on the rate at which these prices grow but may have a short term influence on the rate of price increases.”

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