…Analysts moot continued pressure on price index
By Hilary Mare
THE recently published transport category inflation figures which increased by 7.2 percent year-on-year compared to a 5.0 percent recorded in the prior year will continue to increase owing to fuel hikes and exert more pressure on the consumer price index, analysts have affirmed.
According to Simonis and Storm Securities, which also expects inflation to average 4.1 percent in 2018 before it reaches 5.6 percent in 2019, transport inflation may lead to higher overall inflation during the course of the year.
“We believe that the increase of 60c/l announced on fuel pump prices in June has already taken a toll in the numbers. In addition, the increase in petrol prices by 10c/l in July will exacerbate pressure on transport inflation going forward. We remain concerned that the rise in global oil prices coupled with the upsurge of fuel levies by 25c/l will further lead to higher inflation during the course of the year. We expect inflation to average 4.1 percent in 2018 before it reaches 5.6 percent in 2019,” Indileni Nanghonga, junior analyst at Simonis and Storm said.
Last week, the Namibian Statistics Agency (NSA) released the inflation numbers for June 2018 and on an annual basis, overall inflation increased by 4.0 percent in June 2018 compared to 6.1 percent recorded in the prior year.
“The moderate increase can be ascribed to an annual increase in transport and education by 7.2 percent and 9.9 percent, respectively. On a monthly basis, overall prices increased by 0.3 index points. Most categories (clothing, alcoholic beverages, housing and health) declined on a monthly basis but transport inflation increased dramatically,” added Nanghonga.
Under the housing category, rental payments grew at a slower pace of 2.6 percent y-o-y in June 2018 compared to a 9.6 percent recorded in the prior year.
“The extended supply of dwellings especially in the central area will lead to a decline in prices as consumers remain supressed. We have observed property downgrading (from 2 properties to 1), relocations to cheaper locations and the gradual increase in the availability of serviced land should lead to slow growth if not a gradual decline in dwelling prices.
“The miscellaneous category which is 5.3 percent of the inflation basket, increased by 4.1 percent y-o-y in June 2018 compared to 6.1 percent in the prior year. We expect inflation on financial services to decline; we have already seen FNB Namibia reducing their pricing structure on some product.”
Affirming these view, Capricorn Asset Management also noted that despite the impending ill effects of transport inflation going forward, headline consumer price inflation is expected to print 4.2 percent in July.
“The rise in the transport index from five percent where it was a year earlier stemmed from a surge in fuel costs due to the present exchange rate weakness coupled with advancing global oil prices. Annual food inflation remained just below 4.0 percent but the consistent month-on-month increases foreshadow a reversal in the annual trend. At 3.2 percent inflation, housing, water & electricity costs dropped by 10 basis points since May and by 6.0 percent since June 2017 due to the deflation in rental prices.
“Average inflation for the first half of the year came down to 3.7 percent, which is 4.0 percent lower than what was averaged during the first six months of 2017. As expected food and transport prices are picking up momentum and should exert upward pressure on the overall index, however, the persistent softness in prices of housing and utilities will act as a counterweight. Therefore, we expect headline consumer price inflation will print 4.2 percent in July,” the firm said in a statement.
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