Slowdown in housing and utilities evident from headline inflation

Distortions from both low and high base effects have normalised during February as indicated by the headline inflation reading published this week by the Namibia Statistics Agency. Annual inflation for February came in at a very steady 3.5%, only one tenth of a percent lower than the January headline inflation of 3.6%.

Month on month inflation has also reverted to mean with a reading of 0.1%, in line with monthly inflation for the whole of last year, but normalising from the 1.6% jump last month.

Statistician General, Mr Alex Shimuafeni said “The All Items Index for February 2018 was estimated at 130.7 compared to 126.3 in February 2017, an increase of 4.4 index points. The annual inflation rate for the month of February 2018 decelerated to 3.5% down from 7.8% recorded in February of the preceding year, a slowdown of 4.3 percentage points.”

“The February 2018 annual inflation rate recorded a notable slowdown in the price levels of Food and non-alcoholic beverages from 11.3% to 2%, Communications from 6% to -0.1%, Housing, Water, Electricity, Gas and Other fuels from 9.6% to 3.2%, Furnishings, Household Equipment and Routine maintenance of the house from 8.5% to 0.1%.”

Due to the category weighting applied, Namibia’s overall inflation is driven mainly by only four categories, housing & utilities, food & non-alcoholic drinks, transport, and alcoholic beverages & tobacco. These four categories combined constitute 72% of the total basket of goods and services measured every month to determine inflation.

The main culprit in February’s inflation reading was the education sector where prices increased almost 10%. Two other industries where productivity is falling are Transport with a 6.6% increase and Health with a 6.2% increase.

The inflation basket is due to be rebased this year as it was last rebased in 2013.