Annual inflation continues to slow down

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Staff Reporter

Windhoek-The annual inflation rate for the month of June 2017 decelerated to 6.1 percent down from 6.7 percent recorded in June of the preceding year, representing a slowdown of 0.6 percentage points.

The latest figures from the Namibia Statistics Agency (NSA) show that the All Items Index for the month of June 2017 stood at 127.1, which is an increase of 7.3 percentage points over the June 2016 index which stood at 119.8. The increases in the June 2017 index from the June 2016 index emanated from increases recorded in the indices of all the groups comprising the Namibia Consumer Price Index.

The average annual inflation rate for the period January to June 2017 stood at 7.0 percent, while the corresponding average rate registered during the same period a year earlier was estimated at 6.3 percent. The downward trend of declining monthly annual inflation from January 2017 continued.

The June 2017 annual inflation rate slowed from 6.7 percent recorded in June 2016 to 6.1 percent. On a monthly basis it remained unchanged at 0.1 percent from May 2017 to June 2017.

The major drivers of the annual inflation rate were housing, water, electricity, gas and other fuels (9.8 percent), hotels, cafes and restaurants (8.7 percent), education (7.8 percent), while miscellaneous goods and services and health each recorded 6.1 percent.

Inflation is calculated based on a basket of goods and services containing a representative sample of the goods and or services commonly consumed in a country, and weighted in accordance with the relative percentage of expenditure allotted to each of the said goods at household level. The price of these goods and services are then tracked over time, to illustrate the change in the cost of living over time. As spending patterns change, new products and services are added to the basket, and the basket reweighted so as to better capture the current spending patterns of the consumer at the current point in time.
As such, the inflation basket is generally reconstituted every five years. In Namibia, the basket was last rebased in 2013, using household expenditure data collected in the 2009/10 Household Income and Expenditure Survey. The basket now contains over 350 items, grouped into 12 categories and 55 sub-categories, for which prices are collected on a monthly basis from more than 900 retail outlets.

Namibian inflation, however, is largely determined by three categories of the overall NCPI basket, namely: (i) Housing, water, electricity, gas and other fuels, (ii) Food and non-alcoholic beverages and (iii) Transport, which cumulatively make up just under 60 percent 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 percent of the basket, meaning that the four largest categories represent well over 70 percent of the total basket.

As such, a large increase in inflation in these categories has a greater impact on the overall inflation than do increases in the lower weighted categories. Thus, it is 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.

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