Executive Summary
- In August 2023, the annual inflation rate decelerated to 4.7% compared to 7.3% in August 2022. (Figure 1)
- The main contributors to a decrease in the annual inflation were: transport, furnishings, household equipment, and routine maintenance of the houses and hotels, cafes, and restaurants, (Figure 2)
- On a monthly basis, Namibia recorded an inflation rate of 0.4% an increase from 0.3% recorded for July 2023. The increase mainly emanated from the categories of hotels, cafes, and restaurants (from 0.1 % to 1.9%), food and non-alcoholic beverages (from -0.2% to 0.3%), and miscellaneous goods and services (from –0.3% to 0.3%).
Analysis
- The transport category which accounts for 14.3% of the consumer basket registered a decline in the annual inflation rate of 2.2% in August 2023 compared to 23.2% recorded in August 2022. The decline in the annual inflation rate for this component was reflected mainly in the subcomponent of operation of personal transport equipment which declined to 6.1% compared to 35.4% recorded in August 2022 attributed to a 13.1% fall in petrol and diesel prices
- The annual inflation rate for furnishings, household equipment, and routine maintenance of the house which accounts for 5.5% of the consumer basket registered a decline in the annual inflation rate of 6.6% in August 2023 compared to 8.6% recorded in August 2022. This was attributed to a decline in the price levels of goods and services for routine household maintenance
- Hotels, cafes, and restaurants account for 1.4% of the consumer basket recorded a decline in the annual inflation rate of 7.8% in August 2023 compared to 9.3% recorded in August 2022. This was driven by a downturn in demand for accommodation services which declined to 9.2% compared to 16.5% recorded in August 2022.
- Core inflation increased compared to headline inflation between July and August 2023. Core inflation stood at 4.8% in August from 4.4% recorded in July 2023 and headline inflation increased from 4.5% for August to 4.7%. The slight gap between core and headline inflation could raise concerns about long-term inflation trends. If this gap widens, it may signal a need for more proactive inflation-fighting measures. Figure 1
Figure 1: Annual Core and Headline Inflation Rate, Namibia (August 2022 – August 2023)
Source: NSA & HEI Research
Figure 2: Sub-Categorical analysis (%) change Year on Year (August 2022 – August 2023)
Source: NSA & HEI Research
Outlook
Although the annual inflation rate has shown a deceleration compared to the previous year, recent months have witnessed some upward pressure on monthly inflation. This overall decline in annual inflation can be attributed to a significant drop in inflation within categories such as transportation, furnishings, household equipment, and routine home maintenance.
However, the main current inflation risk stems from the increasing Brent crude oil prices due to growing expectations of a limited oil supply, combined with the strength of the US dollar. We anticipate that monthly inflation specifically for the transport category will increase for September 2023 due to recent diesel price hikes, which were announced by the Ministry of Mines and Energy and took effect on September 6, 2023.