Inflation decreases
http://www.theindependent.co.zw/
Friday, 22 June 2012 09:49
Staff Writer
INFLATION, as measured by the change in the Consumer Price Index (CPI) came
in 0,01% lower than the April figure at 4,02% year on year. Month-on-month
inflation was 0,07%, 12 bps lower than April’s 0,19%. Annual inflation in
Zimbabwe as measured by ZimStats has trended downwards in 2012 from the
December 2011 closing figure of 4,9% to the current 4,02%.
The downward trend in inflation can be explained by two major exogenous
factors — crude oil prices and the South African rand exchange rate. The
current weak global economy has resulted in a drop in crude oil prices which
had exerted a lot of inflationary pressures on many oil importing economies
at the beginning of the year.
The recent drop in oil prices has led to a decline in inflationary pressures
in most economies and is part of the reason why inflation has only moved
sideways locally.
Zimbabwe currently imports most of its basic commodities from South Africa
and these imports constitute a great part of the 31,93% weighted food and
non-alcoholic beverage segment of the CPI calculation. Because the imports
are rand-based, the cost has been on a decline due to the weakening of the
rand, leading to a sideways if not downward movement in the cost of most
imported food and non-alcoholic beverages.
The decline in inflation was guarded by the huge increase in the 16,23%
weighted housing, water, electricity, gas, and other fuels component which
went up by 39 basis points month on month, while the annual increase came in
at 13,94% and clothing and footwear costs went up by 20 bps month-on-month.
The year-on-year food and non alcoholic beverages stood at 4,61% whilst
non-food inflation stood at 3,75%.
The month on month inflation rate in May 2012 was 0,07%, shedding 0,12
percentage points on the April rate of 0,19%.
The month-on-month food and non alcoholic beverages inflation stood
at -0.25% in May shedding 0.39 percentage points on the April rate of 0.14%.
The month-on-month non-food inflation was unchanged at 0,21%.
ZimStats is currently doing a Poverty, Income, Consumption, Expenditure
Survey (PICES). The objective of the survey is to provide data on income
distribution of the population; the consumption level of the population;
private consumption; consumer Price Index (CPI) weights; living conditions
of the population; production account of agriculture (Communal Lands, Large
Scale commercial farms; small Scale commercial farms; resettlement areas, A1
and A2 farms; and poverty. After the survey, the weights of the CPI will
change in line with the international requirement of five years. At present
2008 is the base year for the index.
Elsewhere on the continent, the Ghana Statistical Service (GSS), will rebase
its CPI next year.
Economists argue that the existing methodology is outdated and that it does
not fully represent current expenditure patterns. They also argue that some
of the components in the basket are obsolete.
Housing, water electricity gas and other fuels take up a greater proportion
of the average income, much more than food. However, food and non-alcoholic
beverages, have a greater weight of 31,9 against 16,2 for housing water
electricity gas and other fuels.
The changes to the weightings will make the basket accommodate current
happenings.
The present basket is made up of 68 commodities under 12 components. New
weights will also be assigned to the commodities to reflect their relative
importance in current household consumption. It’s most likely that transport
and communication costs will see higher weightings as they now make up a
bigger share of household spending than previously.
The CPI for the month stood at 101.63 compared to 101.56 in April and 97.71
in May last year.
With the current CPI determination method in place and the Rand continuing
to weaken, inflation is likely to remain subdued and the weak global
economic growth is likely to ensure that oil prices remain depressed in the
short to medium term resulting in weaker inflationary pressures in most oil
importing countries like Zimbabwe.