Month-on-month inflation slows to 18.07% in August

Published: 23 September 2019
Month on month inflation continued to trend downwards in August, with the figure falling to 18.07% from 21.04% in July. Following the decision to suspend the release of annual inflation statistics, the implied figure now stands at 288.6% according to the historical CPI index.

The ZimStat CPI index is derived from multiple weighted baskets that track the prices of food and non-alcoholic beverages, alcoholic beverages, transport, health among others. The rebased data from Zimstat was collected between 14 and 20 August. Unlike previous months, August saw relatively few inflationary policy developments, with access to foreign currency reportedly improving on the interbank market. The impact of the revised electricity tariff was expected to filter through into August however the impact was  diluted by the relatively small weighting of electricity in the CPI basket at 2.95%.
Looking ahead, the accelerated devaluation in the exchange rate experienced during the first two weeks of September could translate to rising inflationary pressures. The prospect depends on the rate maintaining its current trajectory, with economic observers strongly debating the source of the exchange rate pressure.
The recent monetary policy update saw the RBZ clear a second interest rate hike to 70% from 50% in a bid to ease the pressure on the rate. On the other hand, observers have noted the possible inflationary implications of the interest rate hike through the increased cost of borrowing for local firms. Additionally, there might be a delayed impact from the electricity tariff change as firms gradually adjust their pricing to match the cost increment.
Meanwhile, the RBZ has adopted the Monetary Targeting framework to curtail the rise in money supply as a way of dealing with inflationary pressures in the economy. Under this framework, the bank will use base money as the operating target of policy, and this has been pegged at 8-10% by year end. In this regard, Reserve Money recorded year on year growth of 7.05% in May 2019, down from 36.11% in April 2019.  Both the annual and monthly inflation are expected to moderate over time.

Food and non-alcoholic beverages carries the highest weighting at 31.3% in the Zimstat CPI basket segments and according to the statistics prices rose 18.5% in August to leave the year to date inflation for the segment at 194%. Among the food items surveyed sugar products rose the highest during the month at 44.98%. Meat prices rose 10.24%, bread and cereals rose 28.6%, vegetable prices increased 10.6% and oil and fats prices were up 5.05% for the month. Meanwhile Non-food items, were up 68.70%, with the year to date inflation at 125%.
Housing, water, electricity, gas and fuels accounts for 27.62% of the CPI basket. According to the Zimstat statistics, cost related to the category rose by 13.65% leaving year to date inflation at 55%. The main driver for inflation in the segment was a 157.54% rise in the price of electricity, which was also the highest rising item in the CPI basket for the month. Meanwhile liquid fuels increased by 67.58% to leave the year to date inflation at 129%.
Health accounts for 1.42% of the CPI basket and related prices rose the by 7.47% in August leaving year to date inflation for the category at 223%. Among the specific health related costs surveyed, pharmaceutical products rose by 8.12% while hospital services rose 4.5% during the month.
Transport related costs account for 8.4% of the CPI basket and monthly inflation for the category was at 32.66%, with the price of passenger transport up by 141.2%. The year to date inflation for the category is at 195% with passenger transport year to date inflation quoted at 348%.
The highest inflation for the month was in prices related to communications services, which rose by 67.86% during the month. This comes after mobile network operators were cleared to upwardly review their service prices. The industry had pointed out sustainability issues due to the added cost of maintaining their operations in the absence of consistent electricity supplies.
- finx
Tags: Inflation,


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