Inflation to pick up H1

The Namibian annual inflation rate increased to 3.7% in December, up from 3.3% in November. On a month on month basis prices rose by 0.2% for the third consecutive month according to IJG Securities.
“Year on year inflation exceeded the 12-month average for the first time in 16 months, with the effects of the drop in the price of oil over the past year and the knock on effects thereof starting to wear out,” said IJG.
Said IJG, “the two heavy weighted categories in the basket that experienced accelerated annual inflation were alcoholic beverages and tobacco, and housing utilities. Alcoholic beverages and tobacco inflation were driven by the price increases of alcoholic beverages accelerating to 7.7% year on year over the festive season, up from 5.9% in November.”
Accelerating price increases in the housing utilities category was largely driven by electricity, gas and other fuel prices rising relatively more quickly, while price inflation of water supply and other municipal services were unchanged at 10.5% year on year in December IJG observed.
“The easing in food and non-alcoholic beverages inflation was due to inflation of the majority of the sub-components slowing down, with meat prices rising relatively less quickly, followed by fruit, soft drinks and juices as well as bread & cereals price inflation slowing down,” IJG said.
The only category that experienced a price contraction on an annual basis was transport, however, the transport deflation slowed when compared to November. The transport basket category continues to be a drag on overall inflation, exhibiting year on year inflation of -0.3% and month on month inflation of -0.01%.
Transport is the third largest basket category by weighting and as such has a large impact on overall inflation. The deflation experienced by this basket category is largely due to the operation of personal transportation equipment becoming less expensive. Prolonged lower fuel prices due to the oil rout have provided consumers with some respite worldwide and to a large extent in Namibia as well. The effects of cheap transportation flow through to many other basket categories and in this way contribute to lower overall inflation.
“We expect inflation to remain low as oil prices have fallen further during January. However, we expect inflation to pick up in the first half of 2016 as the full benefit of cheap oil is reached and the weak currency causes import prices to rise. Looming drought conditions as well as increasing utilities costs should further see inflation pick up in basket categories such as food and non-alcoholic beverages, and alcoholic beverages and tobacco,” concluded IJG.