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Bad news for low income earners and the poor … as food prices increase strongly in May

by Kelvin Chiringa

 Namibia’s most vulnerable are in for a swim against the tide as food prices strongly increased in May by 3.9% more than any month since September 2017, when food prices rose by 4.2% on a year-to-year basis.

According to the latest consumer price index, the main driver are prices for bread and cereals that actually increased again after they dropped every month since April 2017.

Prices for bread and cereals are 2.3% higher than in May 2017, while they decreased in April 2018 by 1.5%.

Since this category accounts for the largest share of food items (29.4%) price changes have a strong impact on the overall food price inflation.

Price increases for meat (8.5%), fruits (12.6%) and vegetables (5.8%) also accelerated compared to April 2018.

These four categories account form more than 60% of total food prices and therefore strongly determine the food price inflation.

Prices for sugar, jam etc. dropped by 1.0%, while price increases for milk, cheese and eggs slowed down from 2.0% in April to 0.2% in May.

Prices for sugar, jam etc. dropped by 1.0%, while price increases for milk, cheese and eggs slowed down from 2.0% in April to 0.2% in May.

“The increase in food prices is bad news for low income earners and the poor since they spend the largest share of their total consumption on these items. We expect food prices to continue to increase.”

“Future prices at the South African Future Exchange suggest price increases for white and yellow maize of some 7% by December 2018 and some 1% for wheat. Oil prices have also been on the increase triggering fuel price increases that will have impacts on the transportation costs of goods and eventually on the production goods of businesses as well as the costs of consumer products,” said Economic Association of Namibia’s Klaus Schade.

Meanwhile, prices for housing, water and electricity rose at a slower pace of 3.3% in May compared to 3.4% in April.

This is mainly caused by slower price rises for electricity and gas, which rose by 5.5% in May compared to 6.0% in April.

Prices for the maintenance of houses also increased at a slightly slower pace (2.6% in May compared to 3.2% in the previous month), while the inflation rate for rental payments (2.6%) and water supply (7.2%) remained unchanged compared to April.

The inflation rate for transport was slightly lower in May (5.6%) than in April (5.8%) despite fuel price increases in May, while fuel prices remained unchanged in April.

Prices for the purchase of vehicles increased at a slower pace in May (6.6%) compared to April (7.3%), which resulted in the overall inflation rate for transport to decelerate.