Zim inflation slows

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.

Comments (1)

hello editor keep on the fire blazing, keep on exposing these useful information I am a gzu student studying economics and finance I thank you for your cooperation

Raphael Muneri - 21 September 2017

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