Price monster continues to be gentle

There were no major price and income effects as annual inflation for December 2020 stood at 2.4%, down from 2.6% recorded in December 2019.

19 January 2021 | Economics

We expect that the reduced safe-haven appeal of the US dollar and loose US monetary policy will induce greenback weakness this year. Eloise du Plessis, Head of Research: PSG Namibia

The annual inflation rate for December 2020 stood at 2.4%, down from 2.6% recorded in December 2019, a decrease of 0.2 percentage points.

This brings great relief to consumers in the already limping economy as they will not be required to make major adjustment to their budgets.

According to the Namibia Statistic Agency (NSA) Namibia Consumer Price Index (NCPI) report, the slowdown in the annual inflation rate between December 2019 and December 2020 resulted mainly from decreases reflected in the price levels of clothing and footwear which accounts for 3.1% of the overall basket of NCPI that declined by 6.0% compared to an increase of 0.5% recorded in December 2019.

Housing, water, electricity, gas and other fuels, which accounts for 28.36% of the overall basket declined by 1.3% compared to an increase of 1.9% recorded in December 2019.

Furthermore, the transport category which accounts for 14.28% of the overall basket of NCPI also registered a decline of 1.3% in December 2020 compared to an increase of 2.0% registered in December 2019.

Education which accounts for 3.65% of the basket increased by 7.0% in December 2020 compared to 12.0% recorded in December of last year, while the hotels, cafes and restaurants which accounts for 1.39% of the basket increased by 0.1% in December 2020 compared to an increase of 4.1% registered in December 2019.

Commenting on the inflation statistics, Eloise du Plessis of PSG Namibia said, “we expect that the reduced safe-haven appeal of the US dollar and loose US monetary policy will induce greenback weakness this year, which will stabilise the Namibian dollar and contain domestic inflationary pressures”.

Other factors supporting moderate inflation in 2021 are the favourable regional cereal crop outlook and continued weak growth in the residential rental market, she added.



Zones

Annual inflation in Zone 1 (Northern regions) and Zone 3 (//Kharas, Erongo, Hardap and Omaheke) all slowed down to 2.3% except for Zones 2 (Khomas) which increased to 12.4%. The decrease in the annual inflation rate of Zone 1 resulted mainly from declines in the price levels of clothing and footwear from 1.4% to -10.3%.

Housing, water, electricity, gas and other fuel also fell from 0.9% to -2.7%, health from 3.9% to 2.3%, transport from 1.8% to 0.2%, education from 8.9% to 8.8% and alcoholic beverages and tobacco from 4.5% to 1.9%.

The increase in the annual inflation of Zone 2 was mainly due to increases in the price levels of food and non-alcoholic beverages from 0.3% to 8.6%, alcoholic beverages and tobacco -0.4% to 5.9%.

Miscellaneous goods and services increased from -0.4 percent to 5.5%, health from 2.4% to 3.2%. In addition, furnishings, household equipment and routine maintenance of the house also increased from 2.3 percent to 4.2% and communication from 0.7% to 2.7%.

The decline in the annual inflation of Zone 3 resulted mainly from decreases in price levels recorded in transport from 3.7% to -3.1%.

Education from fell from 9.4% to 5.2%, hotels cafes and restaurants from 2.6% to -0.7 percent, health from 4.0% to 1.6%, clothing and footwear from 0.2% to -2.1% and furnishings, household equipment from 3.3% to 1.5%, and housing, water, electricity, gas and other fuels from 2.5% to 0.6%.

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