Inflation continues with downward trend

NGHINOMENWA ERASTUS and LAZARUS AMUKESHEJANUARY 2020 recorded the lowest annual inflation rates for goods and services in 14 years. The low momentum in price movement is good news to consumers, as they can afford their usual basket in these tough economic times.

This, however, does not mean prices on average are not increasing, but rather they are doing so at a much slower pace.

Comparing January 2020 to December 2019, prices in most segments increased apart from the housing sub-group, which recorded negative growth, the Namibia Statistics Agency (NSA) revealed in its latest monthly report released last week.

The NSA monthly reports keep track of changes in purchasing power through the measurement of price movement on basic commodities.

The latest figures show that at the end of last month, the annual inflation stood at 2,1%, a huge drop from 4,7% recorded in January 2019 and 2,6% recorded in December last year.

According to PSG Wealth’s Shelly Louw, the monthly inflation is the lowest in 14 years.

The report shows that, theoretically, the purchasing power of consumers has not been eroded as much, compared to the increase in prices. This means with prices keeping a low movement, they keep aiding the depressed demand experienced in the country.

The slowdown in upward movement in prices was due to decreases registered mainly in education (from 12% to 5,7%, hotels, cafes and restaurants (from 5% to 1,1%) and housing, water, electricity, gas and other fuels (from 2,9 % to -1,2%).

Only the housing sub-group recorded a negative growth on a yearly basis. Alcoholic beverages and tobacco price movements slowed down from 6,4% to 2,6% and food and non-alcoholic beverages moved upward at 2,2% in January from 5,7%.

The main contributors to the average changes in prices for January were transport, with 33,3% upward movement in prices, followed by food and non-alcoholic beverages with prices increased at the rate of 19%, then alcoholic beverages and tobacco with a price growth rate of 17,1%.

Despite the fall in the 12-months average price changes, the monthly price rate change has gained its upward movement to 0,6% in January 2020 from a negative change of -0.1% recorded in the preceding month (December).

The increase in monthly rates in prices movement mainly came more from miscellaneous goods and services than with prices increasing at the rate of 6%, followed by transport and education.

This means consumers had to slightly dig deeper into their pockets in January 2020 or go for substitute products and services compared to December 2019, as price movement in December was moderate with some goods and services’ prices recording negative growth.

According to Louw, the housing and utilities sub-indices recorded negative growth in prices due to rental payment for dwellings that recorded a downward price movement on an annual basis (-1,5%).

Rental prices are measured once a year in January, and Louw said the negative growth in rental prices highlights the depressed housing market.

With the increase in average prices of growth in food products, she said this was in line with global and regional trends driven by mostly milk and vegetable prices.

Louw said their forecast is that consumers should expect upward price movement to 4% in 2020 due to upward pressure from food, fuel and other administered prices.

She added that their forecast can change given the falling global prices of energy, which slowed down by 12% month on month in January, as global demand is negatively affected by the outbreak of the coronavirus in the world’s biggest consumer, China.

Another analyst, Robert McGregor from Cirrus Capital, on his social media post, pointed to the housing and utilities rent inflation for January 2020, which slowed to negative figures, stating that it means prices have come down (in nominal terms) compared to January last year.

Substantiating the drop, McGregor said, “this seems accurate, given the combo of a contractionary housing market in Namibia and weak tangible demand”.

He added that the low (overall) inflation rate is a blessing to consumers/households, though, given the weak economy and overall stressed consumer as higher inflation would erode buying power faster, causing more trouble for the economy.

Interestingly, McGregor said Namibia’s January inflation numbers appear to be lower than even the USA’s inflation.

He added that given that 28,3% of the NCPI basket is set to report negative growth in prices this year, overall inflation is expected to remain relatively low throughout the year.

Email: bottomline@namibian.com.na

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