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Dip in transport inflation lowers overall inflation rate in December 2018

Dip in transport inflation lowers overall inflation rate in December 2018

According to the latest statistics in the Namibian Consumer Price Index, released by the Namibia Statistics Agency on Tuesday, annual inflation continued to slow down during December 2018 to 5.1%, down marginally from 5.2% in December 2017.

Month on month, the annual inflation rate has also receded, measuring 0.5 percentage points lower than the 5.6% recorded in November 2018.

The biggest surprise however, is the monthly inflation rate which has for the first time recorded a contraction, measuring -0.2% from November to December compared to a significant +0.7% growth from October to November.

The reduction in fuel prices resulted in the drop of the inflation rate for the operation of transport equipment, which has the highest weight in the transport category and contributes 8.96% to the overall inflation rate.

Research Associate at the Namibia Economics Association, Mr Klaus Schade noted that the drop in fuel prices by N$1 per litre for petrol and N$0.40 per litre for diesel during December 2018 slowed down inflation to 5.1%.

However, Schade stressed that despite a further drop in fuel prices in January 2019 by N$0.90 per litre and N$1 per litre for petrol and diesel respectively, fuel prices remain higher than in January 2018, and will therefore contribute to the inflation rate.

We can expect oil price fluctuations influenced by changing global growth prospects and in particular by progress in trade negotiations between China and the United States of America, in Brexit negotiations as well as the monetary policy path pursued by the Federal Reserve Bank in the USA and the European Central Bank, among others,” Schade warned.

Schade further said that higher fuel costs over the past months, despite the break in December and January, could, however, result in so-called second round effects, “because producers could pass on higher input costs to the end consumer.”

Overall, we expect the inflation rate in 2019 to remain within the 3% to 6% band targeted by the South African Reserve Bank through its monetary policy,” Schade said.

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