Brian Benza
18 November 2008
For the second consecutive month, the national inflation rate has decreased, pulled down mainly by declining fuel prices.
The Central Statistics Office (CSO) yesterday reported that in October 2008, the national year-on-year inflation rate stood at 13.1 percent, down by 0.9 of a percentage point from 14.0 percent in September.
After an 11-month successive surge, the inflation rate has started to slow down as fuel prices continue to go down in tandem with international oil prices.
According to the CSO, the Transport group index went down by 5.5 percent from 134.1 to 126.7 between September and October. "This was largely due to a decrease in the constituent section index of Operation of Personal Transport which went down by 9.0 percent from 140.9 in September to 128.2 in October," says a statement from the CSO.
"The decrease in Operation of Personal Transport section index was attributed to a fall in retail pump prices for both diesel and petrol each by P0.50 per litre, which was effected on the 19th October 2008."
International oil prices yesterday fell to about $56 per barrel from an all time high of about $146 per barrel in July this year as the global recession weakened demand for oil.
As a result, local fuel prices are expected to drop further this week, a development that should ease the effects of the 30-percent levy on alcohol.
Although fuel prices have slowed inflation generally, food inflation continued to accelerate, led mostly by a jump in bread and cereal prices. The Food and Non Alcoholic Beverages group index moved from 135.5 to 142.0, registering an increase of 4.8 percent between September and October 2008.
The CSO says the rise was due to a general increase in food prices, notably Bread and Cereals (12.6 percent), Oils & Fats (3.4 percent), Milk, Cheese & Milk Products (1.7 percent), Meat [Fresh, Chilled, Frozen] (1.6 percent), Coffee, Tea & Cocoa (1.6 percent), Food Not Elsewhere Classified (1.5 percent). Another group index to have recorded an increase of more than 1 percent was the Furnishing, Household Equipment & Routine Maintenance of Household Equipment group index which rose by 1.1 percent from 114.7 in September to 116.0 in October "due to a general increase in the constituent sections indices".
The October National Consumer Price Index was at 122.0, an increase of 0.2 percent on the September Index of 121.8; the Rural Villages' Index increased by 0.9 percent - from 122.2 to 123.4 between the two months; the Cities and Towns' Index moved from 121.7 to 121.5 between September and October, a drop of 0.2 percent; while the Urban Villages' Index stood at 121.9 in October, an increase of 0.2 percent on the September Index of 121.6. Buoyed by the decline in food and fuel prices, the year-on-year inflation rate has been rising steadily between October 2007 and September, driving the Bank of Botswana to increase the bank rate by 100 basis points in the first half of the year.
However, the slowing down of the inflation rate in the past two months should ease pressure off BoB, which has been under constant pressure to use interest rates in the management of inflation.
At the meeting held last month, BoB's Monetary Policy Committee decided to maintain the Bank Rate at 15.5 percent, saying while inflation remained above the objective range of 3 to 6 percent, a more positive outlook was projected.
"It is anticipated that inflation will decline going into 2009, and move towards the Bank's medium-term objective range," the MPC said. "Nevertheless, the outlook for declining inflation could be temporarily threatened by the effect of any increase in consumption taxes and/or administered prices.
"The Bank is also concerned about indications of generalised higher levels of price increases for several categories of goods and services, which are indicative of second round effects of the past increase in fuel prices and expectations of continuing high levels of inflation."
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