Alcoholic beverages and tobacco drive inflation

Alcoholic beverages and tobacco are some of the products which are driving Namibia’s inflation rate, which increased to 3% in May from 2.9% in April.
Inflation for alcoholic beverages and tobacco increased by 1% from 7.1% in April to 7.2% in May, hence increasing the price levels of basic products consumed.
The products which followed suite in driving inflation were furniture, household equipment and the routine maintenance of houses which increased from 3.6% to 4.8%, with clothing and footwear increasing from 1.7% to 2.4%.
In addition, the contraction in transport inflation which moderated from minus 4.2% on an annual basis in the month of April 2015 to minus 3.3% in the month under review in turn contributed to the overall increase in consumer price inflation in May.
Meanwhile, the annual inflation rate for food and non-alcoholic beverages for the month of May 2015 stood at 4.5%, compared to a year earlier at 9.9%.
The increase in the food prices’ annual inflation over the month was mainly reflected in the following sub-components: vegetables, including potatoes and other tubers (9%), fruit (7.9%), sugar, jam, honey, syrups, chocolate and confectionary (7.1%) and meat (5.7%).
The group contributed 0.8% to the overall annual inflation rate.
The May 2015 Consumer Price Index (NCPI) noted in part that price movements in Namibia increased moderately in that month due to the increased inflation.
The NCPI showed that the slowdown in the monthly inflation was caused by alcoholic beverages and tobacco lowering from 1.5% to 0.5%, transport from 1.7% to 1.3%, hotels, cafes and restaurants from 0.5% to -0.8%, and miscellaneous goods and services falling from 0.2% to -0.2%.
In part, Namibian inflation is largely determined by three categories of the overall NCPI basket, namely housing, water, electricity, gas and other fuels, as well as food and non-alcoholic beverages and transport, which cumulatively make up just fewer than 60% 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% of the basket, meaning that the four largest categories represent well over 70% of the total basket. As such, large increases in inflation in these categories have a greater impact on overall inflation than increases in the lower weighted categories. It is thus rare to see major increases in overall inflation attributed to the lower weighted categories, despite the fact that these categories may have seen relatively high inflation in their own right”, the NCPI noted.
However, the annual inflation rate for housing, water, electricity, gas and other fuels stood at 2.5% for May 2015, as compared to 3.6% recorded during the same period a year earlier.
The movement of the index for this category between May 2014 and May 2015 resulted from annual price increases in the water supply, sewerage services and refuse collection sub-component, which increased by 10.8% annually.
“The period between June 2014 and February 2015 generally recorded decreases in prices of petrol and diesel. The downward trend was reversed in April 2015 when an increase in this sub-component was recorded. The monthly and annual inflation rates for goods were 0.7% and 3.1%, respectively, while those for services stood at 0.0 and 2.9%, respectively.
Corresponding rates recorded during the same period in the previous year stood at 0.5% and 7.8%, and 0.1 and 3.8% respectively,” the NCPI added.