By Hilary Mare
ACCORDING to Simonis Storm Securities transport inflation will drive inflation over the medium term as global oil prices rise.
Annual inflation under this category increased by 3.9 percent y-o-y last month as compared to a contraction of -0.3 percent registered in the prior year.
According to the Namibia Statistics Agency (NSA), this increase was as a result of increases in the price levels of the purchase of vehicles and operation of personal transport equipment which increased from 5.4 percent and -2.4 percent in December 2015 to 10.8 percent and 2.5 percent in December 2016, respectively.
“Namibia’s fuel hiking cycle is already up and running as the Ministry of Mines and Energy increased petrol and diesel prices by 20 and 30 cents per litre in January 2017,” trainee economist Indileni Nanghonga said.
December figures produced by NSA show that the annual inflation rate remained steady at 7.3 percent y-o-y for three consecutive months. Monthly inflation grew at a slower pace of 0.2 percent compared to 0.3 percent in November 2016. According to the NSA, the Namibia Consumer Price Index (NCPI) increased by 0.2 index points m-o-m in December 2016 to 122.1. Inflation averaged at 6.7 percent for the year compared to our forecast of 6.5 percent in 2016.
Housing, water, electricity, gas and other fuels which was the highest weighted category in the basket (28.4 percent) increased by 7.6 percent during December compared to 2.7 percent recorded in the prior year. On a monthly basis, this category increased at a slower pace of 0.0 percent compared to 0.3 percent recorded in November 2016. The 12 month average increased to 7.3 percent in December 2016 compared to a 2.7 percent in the prior year.
“The sharp increase throughout 2016 can be attributed to the tariff hikes in 2016 coupled with the persistent drought that threatened economic activities. With a positive outlook for rainfall in 2017, we expect this category to be subdued going forward. In addition, Dam levels in the country started picking up in the first weeks of 2017 to 26.2 percent of full capacity compared to the lowest level of 22.5 percent at the end of December 2016. This is positive news even though we are only in the first month of 2017,” said Nanghonga.
Inflation in the Food and Non-Alcoholic Beverages category increased by 12.6 percent during December 2016 as compared to 5.9 percent recorded in the prior year. On a monthly basis, the increase remained stable at 0.6 percent over three consecutive months until December. Inflation in the food category was 0.7 percent (m-o-m) compared to 0.6 percent in November 2016. Bread and Cereals contracted by 0.9 percent m-o-m compared to 1.9 percent positive growth recorded in November 2016.
“We expect food inflation to moderate due to better expected rainfall country wide. Food and Non-alcoholic beverages rose to an average of 10.4 percent in December 2016 compared 5.7 percent compared to the prior year.”
“In the midst of increasing prices in most categories, alcohol and tobacco consumers are still enjoying lower prices. Growth in this category remained sluggish in 2016, with a 12 month average of 6.8 percent in December 2016 compared to 7.3 percent recorded in the prior year. On an annual basis Alcohol Beverages and Tobacco increased by 6.7 percent compared to 7.6 percent in the prior year. Furthermore, the slowdown in the price increase was evident on a a monthly basis to 0.0 percent compared to 0.6 percent in November 2016”.
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