Zim inflation continues on downward trend

HARARE - Zimbabwe's year-on-year inflation rate shed 0,62 percentage points to settle at 1,25 percent in July.

Statistics released by the Zimbabwe National Statistics Agency (Zimstat) revealed that on a month-on-month basis, inflation dropped to -0,38 percent from -0,13 percent in June.

The southern Africa country’ s inflation, once regarded as the highest in the world during the country’s economic meltdown that came to an end in 2009, has continued to trend downwards after adopting the multiple currency system.

Market observers said the marginal decline in the rate of inflation was primarily due to increased competition from imported products such as clothing.

Economist Eric Bloch said the continued pressure on the rand/$ exchange rate appears to have eased pressure on inflation with the weakening on the South African rand.

“Inflation is likely to continue at low levels for the foreseeable future, provided that Zimbabwe retains the multi-currency system,” he said.

However, Kingdom Stockbrokers (KSB) in a weekly market review noted that low and declining inflation, while indicative of price stability, could be also an indicator of subdued economic activity.

“While to consumers this may be good news, the same is not true for producers. Producers need inflation to make profit. Rising prices imply you have a better chance of selling your product or service at above cost of production,” read part of the report.

The KSB report indicated that manufacturers in Zimbabwe have a distinctive scenario where they have sub-optimal operating costs (high labour costs, high power and water costs, high finance costs) which impact materially on the final price of the product.

This has resulted in the cost of production going up and lack of demand causing market prices to remain static.

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