The Namibia Statistics Agency has released the Consumer Price Index (CPI) for October 2018 on 15 November 2018. The CPI is being used to calculate the month-on-month (compared to the previous month) and year-on-year (compared to the same month in the previous year) inflation rates. The annual inflation rate rose from 4.8% in September 2018 to 5.1% in October 2018. It is slightly below the inflation rate in October 2017 that stood at 5.2%, but it is the highest inflation rate so far for 2018. On a month-on-month basis, inflation slowed down from 0.8% in September to 0.4% in October 2018.
Herewith are some of the main highlights:
Higher fuel prices have resulted in higher transport inflation and have already led to price increases for transport services and some consumer products as mentioned above. Second round effects of higher transportation costs due to increased input costs for producers and service providers (wholesale and retail trade outlets for instance) will support higher inflation rates in the months to come. However, there could be some relief on the horizon. Global oil prices have, despite sanctions on Iran as one of the main oil exporting countries, weakened from a spike at USD86 per barrel (4 Oct. 2018) to some USD73 per barrel in recent days. Combined with a more stable exchange rate this could contain further fuel price increases even though Government will try to recover losses of the National Energy Fund of close to NAD500 million over the past months.
The inflation rate remains well within the 3% to 6% bracket that the South African Reserve Bank uses as a benchmark for its interest rate decisions.
Recent wage and salary negotiations have again highlighted the limited use of the single inflation rate as a guideline for wage increments. The increase in the minimum wage for domestic workers has been criticised as being too low. The across the board offer at other institutions will increase inequality since the absolute increase for higher income groups exceeds the absolute increase for lower income groups. Separate inflation rates for low, middle and high-income earners would provide more accurate benchmarks for wage and salary negotiations. A separate inflation rate for low-income groups will also assist Government’s decision regarding increases for social grants.