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Decline in housing prices kept inflation stable

By: Kelvin Chiringa

The Namibian Statistics Agency has released the inflation numbers for February 2019 which shows that on an annual basis, overall inflation increased.

Prices for basic commodities shot up to 4.4% in February 2019 compared to 3.5% recorded in the prior year.

The main contributors to the surge were the food and non-alcoholic beverages; alcoholic beverages; transport and education that increased to 5.9%, 6.2%, 7.5% and 11.3% in February 2019 compared to a 2.0%, 4.4%, 6.6% and 9.9% in the prior year.

The housing, water, electricity, gas and other fuels category which weighs the highest in the basket (28.36%), moderated to 1.9% year-on-year in February 2019 compared to a 3.2% increase in the prior year.

Over the last 16 years inflation in this category increased by 5.2% on average.

“We believe that the decline in housing prices (rental, 2.3% y-o-y) coupled with a deflation in the electricity (-1.5% y-o-y) subcategory has offset the increases in the water (5.6% y-o-y) subcategory.”

“The recent upward adjustments in water tariffs by City of Windhoek coupled with possible imported inflation in electricity could lead to moderate upward inflation in this basket. However, we believe that a continuous decline in property prices could limit the upward pressure,” said economist at Simonis Storm Securities Indileni Nanghonga.

The alcoholic beverages and tobacco category, which weighs 12.59% in the basket, could face sin tax increases at the coming budget, to be tabled on the 27th of March 2019.

This will elevate prices in this category, Nanghonga said.

“Even though fuel prices for March 2019 remained unchanged, we expect an increase in fuel levies at the budget tabling. Crude is expected to bridge $70 per barrel towards the end of 2019, which will pose inflationary pressure for the transport category,” said the economist.

Food inflation rose by 5.9% year-on-year in February compared to a 2.0% in the prior year.

The rising concern around food security in Namibia coupled with the drought situation will lead to an increase in food prices by producers, Nanghonga added.

This will heighten the pressure already felt by the consumer, she said.

“Given the above, we reiterate our inflation expectation for 2019 to average at 5.4%,” said Nanghonga.

Kelvin Chiringa

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