By Magreth Nunuhe
WINDHOEK–THE latest Consumer Price Index (CPI) has proved right economists’ warning at the beginning of this year that Namibian consumers should brace themselves for tough and uncertain times ahead for 2016.
Namibia’s Statistics Agency (NSA) figures for August 2016 indicate that non-food inflation rate was almost three times higher in August 2016 at 8 percent compared to the same period last year when it was at 2.4 percent.
The main price drivers for non-food inflation were housing, water, electricity, gas and other fuels, which were attributed to increases in rental costs from 1.5 to 7 percent, while electricity, gas and other fuels increased from 4.6 to 12.4 percent and water supply, sewerage service and refuse collection went up from 9.7 to 11. 4 percent.
In the food and non-alcoholic beverages category, the annual inflation rate more than doubled in 12 months from 5.5 percent recorded last year to 11.5 percent – an increase of 6 percentage points.
“The significant increase in this group emanated from annual price increases recorded in all the sub-groups comprising the food and non-alcoholic beverages component,” said the NSA report.
The annual inflation rate for the transport group increased to 3.4 percent in August 2016 from -1.4 percent registered in August 2015, resulting from increases in the price levels of vehicle purchases and operation of transport equipment sub-components.
However, alcoholic beverages and tobacco slowed down to 5.6 percent from 7.2 percent recorded a year ago, while miscellaneous
goods and services also showed a drop to 5.5 percent from 6.2 percent registered in August 2015.
This was due to a decrease in the prices of tobacco sub-component of the group, according to the NSA.
Inflation is calculated based on a basket of goods and services, containing a representative sample of the goods and or services commonly consumed in a country, and weighted in accordance with the relative percentage of expenditure allotted to each of the said goods at household level.
The price of these goods and services are then tracked over time, to illustrate the change in the cost of living over time.
As spending patterns change, new products and services are added to the basket, and the basket reweighted so as to better capture the spending patterns of the consumer at any given point in time.
As such, the inflation basket is generally reconstituted every five years.
In Namibia, the basket now contains over 350 items, grouped into 12 categories and 55 sub-categories, for which prices are collected on a monthly basis from more than 900 retail outlets.
Namibian inflation, however, is largely determined by three categories of the overall NCPI basket, namely: housing, water, electricity, gas and other fuels; food and non-alcoholic beverages and transport, which make up just under 60 percent of the total inflation basket.
Alcoholic beverages and tobacco make up an additional 12.6 percent of the basket, meaning the four largest categories represent well over 70 percent of the total basket.
South African food inflation and oil prices tend to have significant effects on Namibia’s inflation than the exchange rate.
To forecast consumer inf lation in Namibia, a significant weight should thus be placed on imported inflation, South African food inflation, oil prices and the exchange rate, according to the Bank of Namibia.
When comparing SACU member states for the latest available monthly inflation rate performance of June 2016, the highest annual inflation rate was recorded in Lesotho and Swaziland both at 7.5 percent, followed by Namibia at 6.7 percent, and South Africa at 6.3 percent.
On the other hand, Botswana continued to record a low inflation rate at 2.7 percent in June 2016, according to the SACU inflation report.
All SACU member states, except Botswana, recorded annual figures above the inflation target range of 3-6 percent during the month of June 2016.