Harare — Zimbabweans, after fighting for years the worst hyperinflation in the world, are now getting used to deflation, a time when prices are continually falling.

The Central Statistical Office has found that the cost of living fell 2,3 percent in January and 3,1 percent in February, roughly confirming earlier figures given by the Consumer Council of Zimbabwe using a simpler sampling and costing system.

The CSO was unable to give year-on-year inflation figures. These would be meaningless even if the CSO had adequate data from the last few months of last year, which is highly unlikely.

The calculations last year were done in Zimbabwe dollars and by the end of the year, with prices sometimes changing twice a day as the currency teetered on the brink of collapse, the CSO would need to collect all prices needed for its sampling in a single morning to have even vaguely accurate data.

Far more importantly though, comparing the inflation in Zimbabwe dollar prices last year to the deflation in US dollar prices this year is impossible. The two are not comparable and any attempt to do so would produce a meaningless answer, or even worse, a meaningless answer that gave a quite inaccurate picture.

What can be done is to annualise the present monthly trends. The 2,3 percent drop in the cost of living in January produces a deflation rate, the opposite on an inflation rate, of 24,36 percent. That is if prices dropped every month by 2,3 percent then after 12 months the cumulative price fall would be 24,36 percent.

The higher drop of 3,1 percent in February gives rise to an annualised inflation rate of minus 31,47 percent.

Over the two months prices dropped a total of 5,33 percent, with the February percentage drop being on the lower prices at the end of January, and that two-month drop gives an annualised deflation rate of almost exactly 28 percent, or an annualised inflation rate of minus 28 percent.

Prices were still falling in March with growing competition and greater production by Zimbabwean manufacturers and looking at regional prices there is some slack that can be cut away before prices bottom out, which they must at some stage.

Fortunately, outside the statutory monopolies like Zesa, much of Zimbabwean business has competition or can allow far greater competition. With the supply chains now fixed the restraint is on incomes.

With too little money chasing too many goods deflation is likely to remain the order of the day for a while with competition doing all that is required to push down prices.

Deflation can be a problem under certain circumstances. These do not yet apply in Zimbabwe since prices are falling because of rising productivity and growing volumes of manufacture and sale rather than of falling production and negative growth.

In fact, after suffering the odd situation of rising pries in a declining economy, Zimbabweans are likely to be enjoying falling prices in a growing economy.

Most of the price falls so far have been in the food sector, where a growing price war between two chains is helping concentrate minds on how to shave margins and boost efficiency. At the beginning of dollarisation, allowances and salaries were generally so low that the bulk of almost everyone's income went on food.

The prices of clothing and shoes have started falling in recent weeks as the first groups of workers were switched to US dollar salaries, which while still low at least gave something over after food and utilities.

Now there is some serious discounting on basic electrical appliances as March pay in parts of the private sector gives some workers a little more discretionary income and a very competitive sector seeks to move forward.

Zimbabweans have been through a lot. Now they need to re-orientate themselves to a new and quite different economic order, one where the currency is very stable, prices fall a little each month and the buyer, rather than the seller, is king.