Rent, utilities drive inflation

The Namibian household has been under pressure of late and while there seems to be some relief with some figures dropping in June, the most expensive items continue to be housing and utilities.

Rental increases, at 9.7% in January, have remained unchanged to date.

According to local stockbroking firm IJG Securities, annual inflation declined to 6.1% year on year in June, 0.2% year on year, lower than in May, while prices increased by 0.1% month-on-month, similar to the price level increase witnessed in May.

The slowdown in annual inflation was caused mainly by the easing up of the price inflation levels of transport and alcoholic beverages, as well as tobacco.

Of the 12 basket items, IJG said four saw a higher annual inflation rate than the previous month, three remained relatively unchanged.

Five categories saw lower rates of price increases.

Overall, prices for goods increased by 4.5% year-on-year while prices for services grew by 8.2%, also year-on-year.

Housing and utilities remains the largest contributor to annual inflation due to its large weighting in the basket and the effect of irregularly high rental increases of 9.7% in January.

This category increased by 9.8% year-on-year but remained approximately unchanged month-on-month.

Annual inflation for rental payments for dwellings remained at 9.6% in June and will likely remain this high for the rest of the year.

“Furthermore, the City of Windhoek has put into effect a 13% tariff increase on water consumption, effective 1 June, with a request for a 10% electricity tariff increase submitted to the Electricity Control Board (ECB), which is still pending approval. With the increases in utilities now passed on to the consumer, we believe that this will most likely put upward pressure on this basket category going forward,” IJG said.

In light of this, the firm said that housing and utilities will underpin overall inflation in the country.

Food and non-alcoholic beverages, the second largest basket item in weighting, was the second largest contributor to annual inflation, accounting for 0.8% of the total inflation figure. Food and non-alcoholic beverage prices increased by 4.6% year on year, ticking up from the 3.6% recorded in May, still considerably below the peak of 13.2% witnessed in January. Bread and cereals are more affordable and have decreased by 2.8% year-on-year, while the price of vegetables decreased by 2.1% on an annual basis.

Fruit, however, is now 6.3% more expensive on an annual basis.

Transport was the third largest contributor to annual inflation, accounting for 0.7% of the total 6.1% inflation figure.

Transport prices increased by 5.0% year-on-year but remained flat month on month, with the annual increase driven largely by the 5.8% year-on-year increase in the cost of operating personal transport equipment.

IJG reported that the alcohol and tobacco category displayed increases of 3% year on year with a decrease of 0.3% month-on-month in June versus 3.3% year on year and 0.1% month-on-month in May.

The main driver in this basket category remains alcohol prices which increased by 3.2% annually while tobacco was up 2.3%.

“Inflation in this category remains very subdued despite the announcement of increased sin taxes in March.”

Good news for the consumer is that IGJ is of the view that Namibian inflation has continued to decrease at a faster pace than was anticipated at the start of the year.

A strengthening rand and a strong decline in food prices has seen inflation moderating substantially.

However, the firm says that increased utilities consumption tariffs imposed by the City of Windhoek this month should change the dynamic towards a slight uptick in inflation going forward, this happening within the basket that is the largest contributor towards inflation.



STAFF REPORTER