23 November 2012

Zimbabwe: Inflation Edges Up

Transport costs following the increase in the price of fuel in September and marginal increases in selected food items, put upward pressure on the annual inflation rate in October.

The annual inflation rate as measured by the Zimstats consumer price index rose 0,14 percentage points to 3,38% after months of deceleration.

Year-on-year food and non-alcoholic beverages inflation stood at 5,20% whilst non-food inflation was 2,58%.

However, the month-on-month (m-o-m) inflation rate in October was 0,26%, shedding 0,20 percentage points on the September rate of 0,46%. The m-o-m food and non-alcoholic beverages inflation stood at 0,46% in October shedding 0,62 percentage points on the September 2012 rate of 1,08%. The m-o-m non-food inflation stood at 0,17%, shedding 0,02 percentage points on the September rate of 0,19%.

Liquidity in the country remains constrained and as a result there is weak demand for goods and services.

On the whole, domestic price pressures remain subdued, aside from areas exposed to reduced government spending. Weakness in the labour market due to the high unemployment rate and relatively stagnant salaries as well as the lack of credit will continue to act as a headwind to discretionary consumer spending.

In his 2013 National Budget presentation, Finance minister Tendai Biti said the inflation outlook was promising and on course to meeting the Medium Term Plan target of 5% as the stability in the price level has also benefitted from supply improvements, containment of costs, particularly the wage bill, depressed demand under tight liquidity conditions, tight market competition, and depreciation of the rand against the US dollar.

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