Price monster remains meek in April

Annual overall inflation in April was the highest in the eastern, southern and coastal parts of Namibia.

28 May 2020 | Economics

Demand dropped further because of the Covid-19 pandemic and accompanying restrictive measures put in place by government. – Simonis Storm

The fallout from the coronavirus has had a large disinflationary effect on prices in April due to the large demand shock and plunge in oil prices.

The annual inflation slowed down to 1.6%, down from 4.5% recorded in April 2019. This is the lowest inflation rate recorded in the last decade for Namibia, said the Namibia Statistics Agency (NSA) in latest Namibia Consumer Price Index (NCPI) report.

The slowdown in the annual inflation rate between April 2019 and April 2020 emanated mainly from housing, water, electricity, gas and other fuels, which accounts for 28.4% of the overall basket of NCPI. It declined by -0.5% compared to an increase of 2.2% recorded in April 2019.

Another category that contributed to the deceleration of the inflation was the transport category that accounts for 14.3% of the overall NCPI basket. This slowed down to -0.1% from 7.1% obtained in April 2019.

Lastly, the food and non-alcoholic beverages fell to 4.2% from 5.3% recorded in April 2019. This category accounts for 16.5% of the overall consumer basket.



'Moderate spending'

Commenting on the NCPI report, Simonis Storm (SS) pointed out that demand dropped further because of the Covid-19 pandemic and accompanying restrictive measures put in place by government.

“From a supply side perspective, we saw oil storage capacity being filled to the brim globally as supply outstrips demand. This in turn, combined with the lack of demand, lead to negative oil futures, deflation and eventually interest rate cuts,” SS added.

SS anticipates moderate spending within the alcoholic beverages and tobacco, transport and food and non-alcoholic beverages categories to return as a direct result from the relaxed lockdown restrictions. Therefore, a modest, temporary increase in inflation to pre-lockdown levels may follow.



Zones

With regard to the zones, annual inflation in Zone 1 (northern areas) slowed to 2.1% in April, down from 2.6% in March and 3.8% a year ago.

The slowdown was due to declines in the price levels for transport as a result of lower fuel pump prices, as well as alcoholic beverages and tobacco, and clothing and footwear. Zone 2 (Windhoek) reported annual inflation of just 0.8%, compared to 2.0% in March and 5.0% in April 2019. The slowdown here is attributable to most main lines, including deflation for alcoholic beverages and tobacco, as well as housing and utilities. The significant slowdown in price increases for many line items comes as no surprise, as Zone 2 was placed under lockdown from the end of March and throughout April, thereby hampering consumer spending in April. Lastly, Zone 3 (eastern, southern and western areas) saw inflation of 2.2% in April, compared to 2.5% in March and 4.8% a year ago.

The slowdown here is also attributable to most main lines, including deflation in transport, and housing and utilities.

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