Zim inflation slows

Source: Zim inflation slows – DailyNews Live

Ndakaziva Majaka  18 July 2017

HARARE – Zimbabwe’s inflation, which has been increasing in the last six
months, has gone down slightly as the effects of cash shortages and
depressed spending by consumers begin to be felt.

Figures released yesterday by the Zimbabwe National Statistics Agency
(Zimstat) indicated that prices increased by an average of 0,31 percent
between June 2016 and June 2017 down from the 0,75 percent recorded in
May.

“The month-on-month inflation rate in June 2017 was -0,24 percent,
shedding 0,27 percentage points on the May 2017 rate of 0,03 percent.

“This means that prices as measured by the all items Consumer Price Index
(CPI) decreased at an average rate of -0,24 percent from May 2017 to June
2017,” the stats agency said.

The CPI is a measure that examines the weighted average of prices of a
basket of consumer goods and services, such as transportation, food and
medical care. It is calculated by taking price changes for each item in
the predetermined basket of goods and averaging them.

CPI for the month ending June 2017 stood at 96,86 compared to 97,09 in May
2017 and 96,56 in June 2016.

“The year-on-year food and non-alcoholic beverages inflation prone to
transitory shocks stood at 1,82 percent whilst the non-food inflation rate
was -0,37 percent.

“The month-on-month food and non-alcoholic beverages inflation rate stood
at -0,45 percent in June 2017, shedding 0,52 percentage points on the May
2017 rate of 0,07 percent.

“The month-on-month non-food inflation rate stood at -0,14 percent,
shedding 0,15 percentage points on the May 2017 rate of 0,01 percent,”
Zimstat said.

Zimbabwe is currently in the middle of an economy crisis which has
resulted shortages of cash – affecting the spending patterns of thousands
of ordinary citizens – resulting in low demand for goods in the
supermarkets.

The Reserve Bank of Zimbabwe (RBZ) has said increased money circulation
would help create demand for goods, which in itself, would push prices
high, a positive sign in the current circumstances.

For the last four years, Zimbabwe has been experiencing negative inflation
(deflation) as consumers struggled for credit and less money, resulting
low demand for goods.

RBZ governor John Mangudya has announced that government is in advanced
talks with the Afreximbank to increase its loan facility that would allow
printing of more bond notes.

This would drive inflation up and stimulate demand.

The central bank has so far used close to $170 million from its $200
million Afreximbank facility but this has done little to narrow the cash
shortages.

The World Bank is predicting 3,2 percent inflation for 2017 rising to 9,6
percent in 2018, while the International Monetary Fund (IMF) has forecast
that inflation will rise to seven percent by year-end. Regional think-tank
NKC Economics (NKC) said inflation will continue to trend gradually higher
in the coming months.

” . . . price pressures moderated last month, ascribed to lower food
inflation and the reading on the housing, water, gas and other fuels
sub-index falling deeper into deflation territory.

“The World Bank and IMF are concerned about the bond notes losing their
value against the US dollar, thereby fuelling inflation,” said NKC analyst
Chantelle Matthee.

“For the time being, we maintain our more conservative view that inflation
will average roughly one percent this year.

“However, the situation remains uncertain, and should authorities opt to
inject a significant amount of unbacked liquidity into the market, we will
consider revising our inflation forecast higher,” the NKC economist said.