Depressed economy with rising commodity prices
Overall inflation rose by 4.1% in June 2021 compared to 2.1% recorded in June 2020, an increase of 2 percentage points.
PHILLEPUS UUSIKU
Statistics released by the Namibia Statistics Agency (NSA) last week indicated that prices of goods and services continued to rise in the already depressed domestic economy.
The Namibia economy contracted by 6.5% in the first quarter of 2021, compared to a decline of 2.5% recorded in the corresponding quarter of 2020.
According to the NSA, for the month of June 2021, inflation rose by 4.1%, compared to 2.1% recorded in June 2020, an increase of 2 percentage points. In May 2021, overall inflation stood at 3.8%.
In the first quarter of 2021, the transport sector was one of the sectors that performed poorly, registering a negative growth of 8.7%. On 7 July 2021, fuel prices increased by 40 cents per litre.
According to Cirrus Capital (CC), fuel prices have increased over the course of this year compared to the price decreases last year after the oil price collapse. Compared to their June 2019 prices, petrol is only N$0.10 per litre more expensive, whereas diesel is in fact N$0.45 per litre cheaper than in June 2019.
Drivers
NSA pointed out that the highest change in the annual inflation rate were witnessed in the categories of transport that increased by 9.6%, followed by food and non-alcoholic beverages at 7.3%, miscellaneous goods and services by 6.4%, furnishings, household equipment and routine maintenance of the house by 5.6%, health by 3.3%, alcoholic beverages and tobacco by 2.5%, respectively.
In May 2021, transport inflation stood at 7.3%. The transport category carries the third largest weight of 14.28 in the NSA consumer price index (CPI), behind the housing, water, electricity, gas and other fuels, and food and non-alcoholic beverages categories, each with a weight of 28.36 and 16.45, respectively. On average, for every N$100 that consumers have in their wallets, N$14.28 is likely to be spend on transport.
Also commenting on the inflation figures, Simonis Storm (SS) notes that the two main contributors in transport inflation were operation of personal transport equipment and purchase of vehicles which increased to 13.1% and 8.5% year-on-year in June 2021 respectively, compared to 13.0% and 10.0% year-on-year in May 2021.
The purchase of vehicles subcategory was supported by households and businesses buying vehicles in the month of June 2021, increasing by 10.1% year-on-year. Key dealers in the automotive industry have also alluded to rising vehicle prices in recent months, despite a stronger South African (SA) rand (R) exchange rate, SS said.
Zones
The zonal inflation rates for the month of June 2021 revealed that Zone 3 (//Kharas, Erongo, Hardap and Omaheke) recorded the highest annual inflation of 4.9%, followed by Zone 1 (Northern regions) with 3.9%, while Zone 2 (Windhoek) recorded the lowest of 3.7% annual inflation rate, NSA pointed out.
The increase in the annual inflation rate of Zone 1 resulted mainly from increases in the price levels of transport furnishings, household equipment and routine maintenance of the house.
Similarly, Zone 2 inflation mainly emanated from the price levels of transport, food and non-alcoholic beverages, miscellaneous goods and services, furnishing, household equipment and routine maintenance of the house and health.
Lastly, increases in price levels recorded in miscellaneous goods and services, transport, food and non-alcoholic beverages, alcoholic, beverages and tobacco drove Zone 3 inflation.
“We forecast annual average inflation of 3.5% for 2021.The biggest risks to our forecast include, prolonged social unrest in South Africa leading to major disruptions in the food supply chain and increased food prices, OPEC+ fails to agree on increases in oil production and oil prices increase further, and a weaker rand," SS [email protected]
Statistics released by the Namibia Statistics Agency (NSA) last week indicated that prices of goods and services continued to rise in the already depressed domestic economy.
The Namibia economy contracted by 6.5% in the first quarter of 2021, compared to a decline of 2.5% recorded in the corresponding quarter of 2020.
According to the NSA, for the month of June 2021, inflation rose by 4.1%, compared to 2.1% recorded in June 2020, an increase of 2 percentage points. In May 2021, overall inflation stood at 3.8%.
In the first quarter of 2021, the transport sector was one of the sectors that performed poorly, registering a negative growth of 8.7%. On 7 July 2021, fuel prices increased by 40 cents per litre.
According to Cirrus Capital (CC), fuel prices have increased over the course of this year compared to the price decreases last year after the oil price collapse. Compared to their June 2019 prices, petrol is only N$0.10 per litre more expensive, whereas diesel is in fact N$0.45 per litre cheaper than in June 2019.
Drivers
NSA pointed out that the highest change in the annual inflation rate were witnessed in the categories of transport that increased by 9.6%, followed by food and non-alcoholic beverages at 7.3%, miscellaneous goods and services by 6.4%, furnishings, household equipment and routine maintenance of the house by 5.6%, health by 3.3%, alcoholic beverages and tobacco by 2.5%, respectively.
In May 2021, transport inflation stood at 7.3%. The transport category carries the third largest weight of 14.28 in the NSA consumer price index (CPI), behind the housing, water, electricity, gas and other fuels, and food and non-alcoholic beverages categories, each with a weight of 28.36 and 16.45, respectively. On average, for every N$100 that consumers have in their wallets, N$14.28 is likely to be spend on transport.
Also commenting on the inflation figures, Simonis Storm (SS) notes that the two main contributors in transport inflation were operation of personal transport equipment and purchase of vehicles which increased to 13.1% and 8.5% year-on-year in June 2021 respectively, compared to 13.0% and 10.0% year-on-year in May 2021.
The purchase of vehicles subcategory was supported by households and businesses buying vehicles in the month of June 2021, increasing by 10.1% year-on-year. Key dealers in the automotive industry have also alluded to rising vehicle prices in recent months, despite a stronger South African (SA) rand (R) exchange rate, SS said.
Zones
The zonal inflation rates for the month of June 2021 revealed that Zone 3 (//Kharas, Erongo, Hardap and Omaheke) recorded the highest annual inflation of 4.9%, followed by Zone 1 (Northern regions) with 3.9%, while Zone 2 (Windhoek) recorded the lowest of 3.7% annual inflation rate, NSA pointed out.
The increase in the annual inflation rate of Zone 1 resulted mainly from increases in the price levels of transport furnishings, household equipment and routine maintenance of the house.
Similarly, Zone 2 inflation mainly emanated from the price levels of transport, food and non-alcoholic beverages, miscellaneous goods and services, furnishing, household equipment and routine maintenance of the house and health.
Lastly, increases in price levels recorded in miscellaneous goods and services, transport, food and non-alcoholic beverages, alcoholic, beverages and tobacco drove Zone 3 inflation.
“We forecast annual average inflation of 3.5% for 2021.The biggest risks to our forecast include, prolonged social unrest in South Africa leading to major disruptions in the food supply chain and increased food prices, OPEC+ fails to agree on increases in oil production and oil prices increase further, and a weaker rand," SS [email protected]
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