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Inflation averages at 4%

Inflation averages at 4%

Inflation averaged at 4% in July 2021, compared to 4.1% in the prior month, according to the Namibian Statistics Agency.

Statistician General, Alex Shimuafeni said the main drivers to the July annual inflation rate were transport and food & non-alcoholic beverages contributing 1.4% and 1.1% to the overall inflation rate, respectively.

Simonis Storms Securities’ economist, Theo Klein said the transport category has largely been deflationary between July 2020 and January 2021, turning positive in February 2021.

Klein noted that the two main contributors in transport were the operation of personal transport equipment and purchase of vehicles, which increased to 14.2% and 9.9% in July, respectively.

He explained that operations of personal transport equipment is impacted by tight global supply chains, adding that higher input costs and a shortage of containers and cargo ships will result in higher prices for auto spare parts.

The purchase of vehicles, Klein said, was supported by households and businesses buying vehicles in the month of July 2021 (vehicle sales increased by 19.4% in July 2021).

“Key dealers in the automotive industry have also alluded to rising vehicle prices in recent months, due to staff disruptions and lower semiconductor availability, causing shortages in vehicle manufacturing,” Klein said.

On food inflation, Klein said the largest contributor was the oils and fats (up 17.4% in July). He said given the unusual weather patterns and conditions “have threatened to lower agricultural production across affected countries, with the result of higher food prices globally. Together with supply constraints such as shipping delays, food prices are expected to remain elevated in the coming months.”

PSG Namibia research analyst, Shelly Louw said they project that the consumer price inflation rate will average 3.8% this year, up from an average of 2.2% in 2020 driven by the increase in global food and energy prices from the pandemic induced lows of last year.

PSG forecast inflation to speed up to an average of 4.7% in 2022 as the local economy recovers and the Namibian dollar continues to depreciate.

“Nevertheless, risks to the medium term inflation outlook are skewed to the downside, due to our forecasts for lower global fuel and food prices in 2022 and 2023 as well as the possibility of continued weak domestic demand,” Louw said.

About The Author

Donald Matthys

Donald Matthys has been part of the media fraternity since 2015. He has been working at the Namibia Economist for the past three years mainly covering business, tourism and agriculture. Donald occasionally refers to himself as a theatre maker and has staged two theatre plays so far. Follow him on twitter at @zuleitmatthys