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Prices of basic commodities go down

by Kelvin Chiringa

Latest statistics from the Namibia Statistics Agency shows that both monthly and annual inflation have slowed down.

The annual inflation rate for the month of February 2018 decelerated to 3.5 percent down from 7.8 percent recorded in February of the preceding year, a slowdown of 4.3 percentage points.

The slow down for the month of February was observed in the general prices of food and non-alcoholic beverages from 11.3 percent to 2.0 percent, communications from 6.0 percent to -0.1 percent, Housing, Water, Electricity, Gas and Other fuels from 9.6 percent to 3.2 percent, Furnishings, Household Equipment and Rou ne maintenance of the house from 8.5 percent to 0.1 percent.

“On a monthly basis, the inflation rate slowed to 0.1 percent as compared to 1.6 percent registered in the previous month,” said NSA chief executive officer and statistician general, Alex Shimuafeni.

During the month of February 2018, the main drivers of the annual inflation rate were education (9.9 percent), transport (6.6 percent) and health (6.2 percent).

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 allocated 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 me.

As spending patterns change, new products and services are added to the basket, and the basket reweighted so as to better capture the current spending patterns of the consumer at the current point in me.

As such, the inflation basket is generally reconstituted every five years.

In Namibia, the basket was last rebased in 2013, using household expenditure data collected in the 2009/10 Household Income and Expenditure Survey.

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: (i) Housing, water, electricity, gas and other fuels, (ii) Food and non-alcoholic beverages and (iii) Transport, which cumulatively make up just under 60 percent of the total inflation basket.

 Additionally, following the rebasing of the NCPI basket in 2013, “Alcoholic beverages and tobacco” make up an additional 12.6 percent of the basket, meaning that the four largest categories represent well over 70 percent of the total basket.

As such, a large increase in inflation in these categories has a greater impact on the overall in a on than do increases in the lower weighted categories.

Thus, it is rare to see major increases in overall inflation a attributed to the lower weighted categories, despite the fact that these categories may have seen relatively high in a on in their own right.