Food, Fuel Prices Blacken Inflation Outlook

Jo-Maré Duddy

26 April 2011

Market watcher Investment House Namibia (IHN) has warned that consumers should gear themselves for higher than expected inflation this year as food and transport inflation continue to spiral.

Following the release of the March Namibian Consumer Price Index (NCPI), which shows the annual inflation rate jumping from 3,1 per cent in February to 3,8, IHN upped its forecast for the end of the year from 6,0 per cent to 6,3 per cent.

“Namibian inflation jumped by 0,8 per cent month-on-month (m-o-m) to yield 3,8 per cent year-on-year (y-o-y), above our forecast of 0,5 per cent m-o-m,” IHN said.

Food inflation was the main reason with a m-o-m increase of 1,1 per cent, opposed to IHN’s estimate of 0,5 per cent. Y-o-y food inflation accelerated to 2,6 per cent from 1,2 per cent in February.

According to IHN, food inflation is following the trend in South Africa.

Locally, vegetable inflation was up 3,8 per cent m-o-m, while bread and cereals rose 2,3 per cent m-o-m.

Beverages and tobacco inflation increased 2,8 per cent m-o-m, following increases in sin taxes.

Transport inflation was up 0,92 per cent m-o-m, compared to IHN’s estimate of 0,97 per cent.

“With higher than expected food inflation and continued pressure on transport costs, we revised our year-end inflation forecast up to 6,3 per cent y-o-y (6,0 per cent previously) with an average y-o-y rate of 4,7 per cent for 2011,” IHN said.

The market watchers expect transport inflation to rise to 7,5 per cent y-o-y at 2011 year-end on higher fuel prices, while food inflation should grow to 6,5 per cent y-o-y.

IHN continues to forecast a 50 basis points increase in interest rates in the fourth quarter of this year with the South African inflation rate for March also coming in higher than expected at 4,1 per cent.

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