Possible sharp fall in food prices

Consumers will likely have to wait until around March for price relief.

09 January 2017 | Agriculture

Higher rainfall points to a sharp fall in food prices over the course of 2017, which should alleviate pressure, especially on low-income consumers further down the line, according to Herman van Papendorp and Sanisha Packirisamy of Momentum Investments.

"Elevated food prices have eroded real wage gains for low-income consumers, while financial institutions have tightened credit lending conditions at this end of the market," said Packirisamy.

Although economic times would likely remain challenging, John Loos, household and property sector strategist at FNB, indicated that good news for lower income groups in 2017 would be an alleviation of drought conditions and a meaningful slowing in food price inflation.

He told Fin24 that last year the gap between high- and low-income groups widened. He thinks it was due to food expenditure being such an important factor for low-income groups.

"Reports indicate some relief from the drought, but we are not out of the woods regarding the drought yet. If, however, one looks at the lower Producer Price Index (PPI) for agriculture, one can keep in mind that it normally leads the direction of the Consumer Price Index (CPI) for food," explained Loos.

"So, we should start seeing lower food price inflation in the near term and if that comes down significantly, it could lead to some wage inflation being able to catch up."

There has been a sharp slowdown in the PPI for Agriculture, from 20.6% year-on-year in June 2016 to 6.9% by November 2016. This provides Loos with some hope that the CPI for food and non-alcoholic beverages will soon begin to see an inflation slowdown.

He expects this to be key in slowing overall CPI inflation back into the 3% to 6% target range, from an expected average of 6.3% for 2016 as a whole to 5.9% in 2017.

"This slowing in overall CPI inflation is not a major one, but is important in terms of our expectation that 2017 may not see further interest rate hiking," said Loos.

Durable goods

According to Packirisamy, consumers still seem unwilling to spend money on so-called big-ticket items like furniture, appliances and electronic goods.

The Bureau of Economic Research (BER) found, for instance, that this weak uptake of durable goods is likely due to a subdued sentiment among consumers, rising interest rates and very little credit growth. Moreover, imported durable goods have become more expensive due to sustained rand weakness.

Packirisamy pointed out that high-income earners - those earning above R14 000 per month - seem to be even more reluctant to buy durable goods.

As for low-income consumers, Van Papendorp and Packirisamy remain cautious about spending in this category.

"More clarity on the future political leadership in SA post the ANC National Executive Committee (NEC) elective conference in December 2017 and further expected interest rate cuts in 2018 should provide a more encouraging backdrop for consumer spend in the medium term," they said.

"Moreover, a bleak jobs outlook has persisted in an environment in which businesses have deferred spend on capital and labour in response to elevated political uncertainty and muted domestic demand."

NEWS24

Similar News

 

N$650 000 for garden project

15 hours ago | Agriculture

NAMPAFarmers and community members from Hukus in the Aminuis area of the Omaheke Region on Thursday received a donation of N$650 000 for the development...

Bumper devil's claw harvest

15 hours ago | Agriculture

Conservancies in the Otjozondjupa Region had a bumper devil's claw harvest this year, resulting in a hefty income for the conservancy and its members. According...

Festive season puts pressure on poultry producers

1 day - 12 December 2017 | Agriculture

Namib Poultry Industries is pulling out all the stops to ensure that Namibians can eat chicken over the festive season, despite the constraints and challenges...

Produce or leave

5 days ago - 08 December 2017 | Agriculture

The agriculture ministry has warned unproductive resettled farmers that their land could be transferred to those that will produce.The government has taken action to improve...

Agribank gives more time for loan repayments

1 week ago - 06 December 2017 | Agriculture

NAMPAThe Agricultural Bank of Namibia has adopted new credit evaluation norms and now offers longer grace periods for loan repayments, effective 1 December 2017.According to...

Croplands measured on new map

1 week ago - 06 December 2017 | Agriculture

A new interactive map which details croplands worldwide in the highest resolution yet, has been released. It is expected to assist in ensuring global food...

The secret to enhancing crop yield

2 weeks ago - 29 November 2017 | Agriculture

Farmers are notoriously eager to fertilise their soil well and when plants do nto grow to full capacity, often blame lack of water or high...

Rain brings challenges for farmers

3 weeks ago - 22 November 2017 | Agriculture

While rain is always a welcome delight for both livestock and crop farmers, it also comes with challenges for farmers as the fresh fodder can...

Working the fields

3 weeks ago - 22 November 2017 | Agriculture

The season for planting has officially arrived and farmers should be busy preparing the land for cultivation and planting.Establishing a crop means that seeds or...

Mutton still under pressure

3 weeks ago - 16 November 2017 | Agriculture

The domestic supply of sheep to export abattoirs in Namibia remains under pressure with a decrease of 23.59% in the number of sheep slaughtered at...

Latest News

Namibia drops among world's good...

15 hours ago | Society

Namibia has slipped four places to 88th on a global index that ranks the countries that contribute to the greater good of humanity.Namibia's global contribution...

MD claims witch-hunt

15 hours ago | Government

The board of the National Petroleum Corporation of Namibia (Namcor) has terminated the contracts of nine non-permanent staff at the parastatal in an alleged standoff...

Farmers face phosphate shortage

15 hours ago | Agriculture

Namibia will experience a shortage of phosphate products used as supplements for animal feed while the South African producer of phosphate and phosphoric acid is...

N$650 000 for garden project

15 hours ago | Agriculture

NAMPAFarmers and community members from Hukus in the Aminuis area of the Omaheke Region on Thursday received a donation of N$650 000 for the development...

IFRS 16: The new leases...

15 hours ago | Business

STAFF REPORTER - The new leases standard features a single lease accounting model for lessees, with a host of different transition options...

NC convenes urgent session

15 hours ago | Government

The National Council will convene an urgent session next week to review three bills. A statement issued by the secretary to the National Council,...

Mass memorials for crash victims

15 hours ago | Accidents

A number of memorials will be held by relatives of the ten people who died in a head-on collision less than two weeks ago. ...

Policeman, farmworker remain missing

15 hours ago | Crime

There is still no trace of two missing persons in the Otjozondjupa Region - a 55-year-old police officer who went missing at Tsumkwe in June...

Morocco announces car industry deals...

15 hours ago | Business

NAMPA/REUTERSMorocco said on Monday it had signed deals for 26 auto industry projects worth a total of €1.23 billion as it seeks to build its...

Load More