Namibia: NSA Recording Low Inflation Despite Price Hikes

OVER the past four to five weeks, the Namibian Competition Commission has received numerous complaints from members of the public about significant increases in prices of various products in the wake of the Covid-19 pandemic.

This, however, is not reflected in the Namibia Statistics Agency's (NSA) recent inflation figures released last week.

A price movement analysis by the commission indicates clear evidence of price exploitation, as prices increased 14% to over 1000% for certain products.

Analysts said while this is true, it might be because the goods and services in the baskets used to trace price movements do not include most necessities that had prices hiked.

They also added that the basket was last reconstituted seven years ago (2013), based on the 2009/10 Namibia Household Income and Expenditure Survey. Household consumption patterns would have changed from then until now, but the basket would still be broadly representative.

According to the NSA, inflation figures for April indicate affordability across the board compared to last year except for educational services which appear not to be affected by Covid-19 at all.

However, from the complaints received by the competition watchdog, most of them revealed that the essential goods attracted the most price hikes.

The commission said: "Consumers are now paying more for products that considered to be essential".

One of the category expenditure and price patterns that barely gets attention is health expenditure, which contributes only 2,1% to the overall basket of goods and services that Namibians spend their disposable income on.

"Thus, it is rare to see major increases in overall inflation attributed to the lower weighted categories, despite the fact that these categories may have seen relatively high inflation in their own right," the NSA said.

The price for medical products, appliances, and equipment have increased at the rate of 0,4% from March to April, and 4,8% annually.

Outpatient services, medical, dental, and paramedical service costs did not change monthly but compared to last year the prices have increased 1,9%.

NSA did not record any movement in the cost of hospital services.

In April 2020, the annual inflation rate slowed to 1,6% from 4,5% recorded in April 2019 while on a monthly basis, the inflation dropped to -0,3% from 0,1% recorded in March 2020, "making it the lowest inflation rate recorded in the last decade for Namibia," observed the NSA.

The NSA attributes the price movements to the fallout from the coronavirus leading to a large disinflationary effect on prices in April due to the large demand shock, and plunge in oil prices.

The agency also cautioned that the implementation of lockdown measures had an impact on the routine compilation of the Namibia Consumer Price Index NCPI, in particular, the collection of prices.

Explaining that "it became increasingly difficult due to the increased number of missing items in sampled outlets, the temporary closure of retail outlets, and restrictions on movement".

Thus, the prices of goods and services which could not be collected or only be collected to a very limited extent had to be updated using imputation techniques.

More than 9 000 prices of goods and services are collected on a monthly basis from more than 900 retail outlets in eight localities.

Economist Salomon Hei explained the difference in the price movements was due to the period covered by the two reports, with NSA comparing to last year prices and the NaCC to prices for the last four or five weeks.

He added that some of the products that are being consumed more now especially due to Covid-19 are not part of the consumer basket sampled by NSA, as a result their price movement was not captured by the index.

The CPI basket was rebased seven years ago (2013) based on 2010 NHIES survey purchasing patterns.

Hei also attributed the low inflation figures to the weight attached to various goods and services consumed, as a category like health only weigh around 2% of the basket, which could shadow any price hike on that category.

PUZZLES

Close to 40% of the complaints received by the commission relate to price increases for food and basic consumer items such as fruits and vegetables, rice, maize meal, baby formula, dairy products, etc.

The inflation report shows that food prices have moved at a slow pace by 1,1% from March to April and increased 4,2% for the past 12 months.

At least 25% of the complaints in the NaCC assessment relate to transport, construction, accommodation, furniture, household appliances, and motor vehicle parts.

According to NSA, transport related products and services prices have decelerated on a monthly and annual basis, with -3,6% and -0,1%, respectively.

On the household appliances and furniture category, the agency sampled that from March to April, prices in this category have recorded a negative price movement, while on an annual basis they increased at the rate of 2,2%.

The commission received 13% of complaints in respect of health and hygiene products such as immune boosters, hand sanitisers, and masks.

"It can be observed that the prices of masks, hand sanitisers and immune-boosting products such as oranges, naartjies, and raw ginger all saw huge increases," says the report.

The commission added that the jump in prices is despite some of the products being unaffected by supply chain challenges and are therefore not in short supply.

OUTLOOK

Robert McGregor, an analyst at Cirrus Capital said the anticipation is that annual inflation as measured by the NSA will remain very low this year given the large weighting of rent charges and the fact that these have been recorded as deflationary. Lower fuel prices will also serve to keep inflation low; however going forward this depends on what happens to global oil prices and the US dollar-rand exchange rate.

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