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Consumer Inflation remains high – PSG

According to the Namibia Statistics Agency (NSA), the consumer price index (CPI) inflation rate remained stable in December.

An inflation rate of 7.3% y-o-y was recorded in December, unchanged compared to November. Looking at the four largest sub-indices comprising the overall CPI, the food & non-alcoholic beverages sub-index increased by 12.5% y-o-y last month, up from the 11.6% y-o-y increase recorded in the preceding month.

Most food subgroups recorded double-digit increases except the meat (8.5% y-o-y) and milk, cheese & eggs (9.1% y-o-y) subgroups. The alcoholic beverages & tobacco sub-index increased by 5.6% y-o-y in December, (6.5% y-o-y in November) as a result of increasing alcoholic beverage prices (6.8% y-o-y).

The housing, utilities, gas & other fuels sub-index increased by 7.6% y-o-y last month (7.9% y-o-y in November), mainly due to higher electricity, gas & other fuel prices (9.1% y-o-y). The transport sub-index increased by 3.9% y-o-y in December, compared to a 3.7% y-o-y increase in November, driven by higher vehicle prices (10.8% y-o-y). The m-o-m CPI inflation rate ticked up to 0.5% last month, from 0.2% in the preceding month.

In their analysis, financial services group, PSG said, December marked the third straight month that an inflation rate of 7.3% was recorded of which the average inflation rate for 2016 was 6.7%.

We expect a similar average inflation rate for 2017 as food and administered price pressures are expected to persist. The rand (to which the Namibian dollar is pegged one for one) remains a significant risk for inflation,” PSG said.

We expect the South African currency will come under pressure this year due to the substantial threats of South Africa possibly losing its investment-grade credit rating status and higher than expected US interest rates. Looking ahead, our baseline expectation remains for the Bank of Namibia to raise the repo rate by 25 bps during 2017,” PSG added.

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