Inflation rose above expectations

Namibians are expected to pay more for their basic needs and wants as local consumer prices have increased significantly over the last month, the Namibia Statistics Agency’s Consumer Price Index report for October 2016 shows.
According to the agency, the annual inflation rate rose significantly to 7.3% at the end of October 2016 compared to 3.4% recorded in the prior year. And also the monthly inflation grew by 0.5% in October compared to 0.2% in September 2016.
“Inflation during October was mainly driven by monthly growth in Alcoholic beverages and Tobacco (from 0.1% to 0.6%), Housing, Water and Electricity (0.0% to 0.3%), Communication (0.2% to 4.0%) and Hotels and Restaurants (0.2% to 0.4%),” the agency stated.
Economic researchers, IJG Securities Namibia said that the country’s inflation continues to surpass the consumer price index in neighbouring South Africa. However, IJG stated that inflation expectations remains high in both Namibia and South Africa, with the latter expected to average its inflation to 6.4% in 2016 and 5.8% in 2017, as per figures from the South African Reserve Bank.
“These expectations are largely driven by currency weakness and the pass through effect of higher Import prices. The effect of higher food inflation due to the drought also has a negative effect,” IJG noted.
The Statistics Agency also reported that the sub-categories of food generally showed moderate increases between 0.3% and 0.5%, except for a 1.4% increase in fruit, a 3.5% increase in the price of fish and a 4.3% increase in the price of coffee and tea. However, the price of dairy decreased by 1.4% month on month, at the same time oils and fats also decreased by1.4%.
The upwards pressure on food prices are mainly a result of the drought in Southern Africa which will hopefully ease as the rain season for 2016/17 begins, IJG explained. However, due to inflation expectations, which return to the target band and low level of growth, the firm does not anticipate Repo Rate to increase in response to inflation from the monetary policy committee.
“Our expectations of Namibian inflation for 2016 stands at an average of 6.6% and 6.4% for 2017. The main reason for relatively high level is the continual increases seen in administered prices, sustained increases in rentals and housing, and the continuing pass-through effect of high food import prices,” IJG stated.