Don’t be fooled by meeker price monster

The price monster might be on a downward trend in Namibia, but the deceleration in inflation does not necessarily imply tangible economic benefits, Simonis Storm (SS) has warned.

Inflation rates continue to be significantly elevated and the inflation outlook remains vulnerable to several risks, notably in the realm of food prices. These could escalate further due to the impact of the El Niño weather conditions, SS says in their analysis of the latest inflation figures.

Data released by the Namibia Statistics Agency (NSA) last week show overall annual inflation averaged 4.8% last, significantly down from 6.1% in April 2023.

SS’ projections indicate a deceleration in inflation from an average of 5.9% in 2023 to 4.9% this year.

Last month, the inflation rate for food and non-alcoholic beverages was 4.9% year-on-year (y/y), down from 13.5% y/y in April 2023.

Food

Bread and cereals, as well as oils and fats, showed deflationary trends, with decreases of 0.5% and 1.5% y/y, respectively.

Prices for meat, milk, cheese, eggs, fruits, vegetables, sugar, jam, honey, syrups, chocolates and confectionery items increased at a slower rate compared to April 2023.

However, fish prices rose with an inflation rate of 11.7% y/y last month, up from 8.8% in April 2023.

Last month, the FAO Food Price Index saw a marginal month-over-month (m/m) rise of 0.3%, but it stayed 9.6% lower compared to the previous year, mirroring global commodity price trends.

The FAO Cereal Price Index halted its three-month decline, with maize prices climbing due to heightened demand and logistical challenges, while wheat prices remained steady.

The FAO Vegetable Oil Price Index hit a 13-month peak, mainly due to increased sunflower and canola oil prices. Meat prices overall rose by 1.6% m/m, although pig meat prices dipped slightly due to decreased demand.

Sugar prices fell by 4.4% m/m, supported by improved supply, whereas dairy prices edged down after six consecutive months of increases, influenced by reduced demand for skim milk powder and cheese.

Transport

The annual inflation rate for the transport category climbed to 5.9% y/y, compared to 3.8% in April 2023 and 4.3% in March 2024.

This increase is mainly due to the operation of personal transport equipment subcategory, which saw a 7.0% inflation rate last month. Specifically, petrol and diesel prices played a significant role, with petrol priced at N$22.30 per litre, marking a 12.7% y/y change, and diesel 50ppm priced at N$21.77 per litre, showing a 5.4% y/y change.

“Moreover, the ministry of mines and energy's decision to raise fuel prices for both petrol and diesel for May 2024 suggests an anticipated increase in transport inflation for the coming month,” SS says.

Power

Following NamPower's request for a tariff increase of 14.59% for both generation and transmission tariffs, the Electricity Control Board (ECB) has approved a lesser increase of 8% in NamPower's bulk electricity tariff for the 2024/25 period.

This means the average tariff will rise from N$1.9856 per kilowatt hour (kWh) currently to N$2.1444 per kWh. The primary reason behind this adjustment, as stated by the ECB, is the rising cost of electricity generation, particularly due to expenses linked to imported electricity.

As of April 2024, the inflation rate for housing, water, electricity, gas and other fuels stood at 3.6% y/y, with electricity charges inflation currently at 8.7% y/y.

“Since electricity charges are included in the calculation of the CPI basket, the tariff adjustment, typically effective in July, is expected to exert further pressure on inflation figures,” SS says.