Drought to drive food prices
Namibia’s annual overall inflation rate last month was 4.7%, the lowest since August 2018.
Jo-Maré Duddy – The price monster’s appetite continued last month with annual overall food inflation rising to 6.1% - up from 5.4% in December and significantly higher than the 1.7% a year ago.
This is the highest rate since almost two years.
Food and non-alcoholic beverages carries the second biggest weight in Namibia’s consumer basket with 16.45% of disposable income spent on this.
Reacting to the latest inflation figures released by the Namibia Statistics Agency (NSA) last week, local analysts agree the drought will put food inflation under pressure this year.
“Given a high probability for a dry season in South Africa and Namibia, we expect food prices continuing with an upward trend because of high importation cost and constrained domestic output,” Simonis Storm (SS) said.
PSG Namibia said maize prices have risen in recent months due to weaker production in the Southern African region. January’s inflation rate for bread and cereals came in at 8.3%, continuing its steep climb since November last year. The latest figure is in sharp contrast to that of last January, when inflation for bread and cereals stood at -4.7%. Bread and cereal inflation spent the first four months of 2018 in deflationary territory.
Meat inflation increased slightly from 3.5% in December to 3.6% last month, but remains far below the 9.3% of January 2018. According to Klaus Schade, research associate at the Economic Association of Namibia (EAN), bread, cereals and meat contribute almost 57% to total food price inflation.
Vegetables recorded the biggest jump last month. Its inflation rate for January was 18.8% compared to 12.8% the previous month and -1.3% a year ago. Fruit increased from 8.1% to 8.5% and 3.5% a year ago.
Fuel
The drop in the fuel price was the main driver behind annual overall inflation easing from 5.1% in December to 4.7% last month. This is the lowest overall rate since last August. In January 2018, overall inflation stood at 3.6%.
With a weight of 14.28, transport is the third heaviest item in the national consumer basket.
Annual overall transport inflation last month was 7.3%, down from 10.9% in December, but higher than the 6.3% a year ago. The rate for the operation of personal transport equipment – which includes the fuel price – dropped from 10.5% in December to 4.8%. In January 2018, this rate was 7.4%.
According to Schade, the cost of fuel accounts for 9% of the total consumption basket.
The drop in the inflation rate brings more relief to consumers, as well as the business sector, he said. “However, not all households will benefit to the same extent from the slowdown in price increases. Poor households that spend most of their income on food, and a lower share than the average household on transport and rent in particular in rural areas, will struggle more to make ends meet,” Schade said.
PSG Namibia still forecasts the average Brent oil price will come in lower in 2019 compared to 2018, which is supportive of more subdued transport price inflation. “However, global oil prices have started to recover in January on the back of renewed pledges from major oil producers to cut back on supply and the impact of economic sanctions against Venezuela,” the analysts said.
Other data
Other major annual overall inflation rates in January were: alcohol and tobacco 6.4% (5.9% in December; 4.2% in January 2018); clothing and footwear -0.7% (-0.2% and -3.3%); housing, water and electricity 2.9% (3.1% and 3.6%); furniture, household equipment and maintenance 1.7% (2.0% and -0.9%); and health 2.0% (4.8% and 6.2%).
This is the highest rate since almost two years.
Food and non-alcoholic beverages carries the second biggest weight in Namibia’s consumer basket with 16.45% of disposable income spent on this.
Reacting to the latest inflation figures released by the Namibia Statistics Agency (NSA) last week, local analysts agree the drought will put food inflation under pressure this year.
“Given a high probability for a dry season in South Africa and Namibia, we expect food prices continuing with an upward trend because of high importation cost and constrained domestic output,” Simonis Storm (SS) said.
PSG Namibia said maize prices have risen in recent months due to weaker production in the Southern African region. January’s inflation rate for bread and cereals came in at 8.3%, continuing its steep climb since November last year. The latest figure is in sharp contrast to that of last January, when inflation for bread and cereals stood at -4.7%. Bread and cereal inflation spent the first four months of 2018 in deflationary territory.
Meat inflation increased slightly from 3.5% in December to 3.6% last month, but remains far below the 9.3% of January 2018. According to Klaus Schade, research associate at the Economic Association of Namibia (EAN), bread, cereals and meat contribute almost 57% to total food price inflation.
Vegetables recorded the biggest jump last month. Its inflation rate for January was 18.8% compared to 12.8% the previous month and -1.3% a year ago. Fruit increased from 8.1% to 8.5% and 3.5% a year ago.
Fuel
The drop in the fuel price was the main driver behind annual overall inflation easing from 5.1% in December to 4.7% last month. This is the lowest overall rate since last August. In January 2018, overall inflation stood at 3.6%.
With a weight of 14.28, transport is the third heaviest item in the national consumer basket.
Annual overall transport inflation last month was 7.3%, down from 10.9% in December, but higher than the 6.3% a year ago. The rate for the operation of personal transport equipment – which includes the fuel price – dropped from 10.5% in December to 4.8%. In January 2018, this rate was 7.4%.
According to Schade, the cost of fuel accounts for 9% of the total consumption basket.
The drop in the inflation rate brings more relief to consumers, as well as the business sector, he said. “However, not all households will benefit to the same extent from the slowdown in price increases. Poor households that spend most of their income on food, and a lower share than the average household on transport and rent in particular in rural areas, will struggle more to make ends meet,” Schade said.
PSG Namibia still forecasts the average Brent oil price will come in lower in 2019 compared to 2018, which is supportive of more subdued transport price inflation. “However, global oil prices have started to recover in January on the back of renewed pledges from major oil producers to cut back on supply and the impact of economic sanctions against Venezuela,” the analysts said.
Other data
Other major annual overall inflation rates in January were: alcohol and tobacco 6.4% (5.9% in December; 4.2% in January 2018); clothing and footwear -0.7% (-0.2% and -3.3%); housing, water and electricity 2.9% (3.1% and 3.6%); furniture, household equipment and maintenance 1.7% (2.0% and -0.9%); and health 2.0% (4.8% and 6.2%).
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