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Food Still Biggest Contributor To Inflation …however, decrease in food prices likely

By:Staff writer
Food and non-alcoholic beverages were the biggest contributors to inflation after July’s annual inflation rate stood at 4.5%.
This is a year-on-year decrease in inflation compared to the 6.8% witnessed in July 2022 as well as a month-on-month decrease from the 5.3% seen in June this year.
In general, the price of food is, however, seen to be on a downward trajectory.
Food and non-alcoholic beverages contributed 2.0 percentage points. In comparison to the previous month, food and non-alcoholic beverages’ contribution to the 5.3% annual inflation rate for June was 2.2 percentage points.
According to the Namibia Statistics Agency (NSA), food accounts for 14.8% of the consumer basket in the Namibia Consumer Price Index (NCPI).
Bread and cereals account for the highest weight of food items that consumers purchase, having a weight of 4.8%, followed by Meat by 3.5%. Sugar, jam, honey, syrups, chocolate and confectionery by1.4%.
Meanwhile fish was 12.6% more expensive in July 2023 compared to 6.8% in July 2022.
The NSA has further reported that the largest rise was reflected in Dried, smoked, salted fish and seafood (from -2.4% to 12.8%); Bottled/Tinned fish (from 1.3% to 8.7%) and Fresh, chilled and frozen fish (from 10.0% to 13.4%).
The inflation rate for meat stood at 9.2% during July 2023 compared to 3.7% recorded during the same period a year earlier. Pork recorded the highest change in prices (from 0.6% to 21.1%) followed by bacon (from 1.7% to 21.3%), ham (from 2.6% to 20.7%), sausages (from 0.3% to 15.2%), and chicken, birds subcategory (from 5.2% to 15.3%).
Analysis from Simonis Storm Securities (SSS) indicates that lower producer costs in Namibia’s key trading partners should therefore aid lower import and consumer prices.
South Africa, SSS observed, imported 23.3% of their goods from China, which implies they should also be seeing less inflationary pressure.
“The UN Food and Agriculture Index indicates that global food prices remain on a declining trend, which is expected to alleviate inflationary pressures globally. Indeed, future contracts of most soft commodities are priced lower than their current spot prices.
“However, there are multiple risks to local food prices. The expected increase in wheat prices is due to Russia’s recent announcement of its withdrawal from the Black Sea Grain initiative, hindering Ukraine’s exports of wheat to the rest of the world, which is an upward risk to lower food prices locally,” SSS said.
India’s ban on certain rice exports has already led to major rice price increases in other parts of the world and would likely filter through to Namibia as well.
Additionally, vegetables are becoming more expensive in Namibia and globally due to climate change concerns and forecasted lower supply levels, as crop yields and harvests are negatively impacted.
“Global farmers are advised to plant less crops in preparation of El Nino. Cabbage, onion, broccoli and cauliflower, beetroot and citrus fruits are the top five drivers of food inflation. However, cooking oil, biltong and banana prices decreased more than 5% y/y in July 2023,” SSS analysts said.

Staff Writer

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