…Expected to average 5.4 percent in 2018
By Hilary Mare
FOLLOWING the release of inflation figure by the Namibia Statistics Agency (NSA), last week, Simonis Storm Securities has affirmed that the downward trend will continue as the year progresses.
Simonis Storm junior Analyst, Indileni Nanghonga, expressed confidence noting that the 12 month moving average is a good indication of the inflation trend.
“We are expecting inflation to moderate further mainly due to a higher based effect in 2017 and the continued strengthening of the Rand. Consumer goods continue to dominate Namibia’s import bill of which over 50 percent are from South Africa. We observed slow growth in South Africa’ food inflation data and this will feed through to Namibia in coming months. We reiterate our expectation for inflation to average at 5.4 percent in 2018,” said Nanghonga.
Namibia’s annual inflation rate for January 2018 increased at a slower pace of 3.6 percent y-o-y compared to 8.2 percent recorded in the prior year. The moderate annual inflation can be attributed to the high base effect seen in 2017.
Food and non-alcoholic beverages increased at a slower pace of 2.0 percent y-o-y in January 2018 compared to 13.2 percent recorded in the prior year. With reference to the annual increase, most inflation categories moderated in January 2018 with an exception of health, education and transport which increased by 6.2 percent, 10.0 percent and 6.3 percent compared to 5.6 percent, 8.2 percent and 5.2 percent, respectively in the prior year.
The increase in petrol prices at the end of 2017 is just being realised in transport inflation.
“We believe that the global increase in fuel prices will be offset by the stronger US ZAR (Currently at R11.60). Of interest to note is the deflation in the clothing category since September 2017 to the period under review (average -3.8 percent). The deflation coupled with slow PSCE and sluggish economic growth puts pressure on sales revenue clothing retailers and we noted that some are selling stock at lower than cost price. The increase in utility prices (specifically electricity) also adds to the pressure face by clothing retailers,” added Nanghonga.
On a monthly basis, inflation picked up in most categories with an exception of the transport category which increased at a slower pace of 0.6 percent in January 2018 compared to 0.8 percent in the prior month.
Inflation is calculated based on a basket of goods and services, containing a representative sample of the goods and or services commonly consumed in a country, and weighted in accordance with the relative percentage of expenditure allotted to each of the said goods at household level. The price of these goods and services are then tracked over time, to illustrate the change in the cost of living over time. As spending patterns change, new products and services are added to the basket, and the basket reweighted so as to better capture the current spending patterns of the consumer at the current point in time.
As such, the inflation basket is generally reconstituted every five years.
During January 2018 the Index for Goods and Services stood at 131.0 and 129.9 respectively compared to the corresponding indices of 127.3 and 124.5 recorded during the same period last year. The monthly and annual inflation rates for Goods were 0.6 and 2.9 percent while those of Services stood at 3.0 and 4.4 percent respectively. The corresponding rates recorded during the same period last year stood at 0.8 and 8.1 percent as well as 6.6 and 8.3 percent respectively.
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