Inflation heads southward, again

Bus1Business Reporter
The annual inflation rate trended southward again in July, dropping 0,16 percentage points to 0,15 percent in August, but analysts believe the rate will stay in positive territory. According to the Zimbabwe National Statistical Agency, this means that prices of goods and services increased by an average of 0,15 percent in the 12 months period to August 2014.

The year-on-year food and non-alcoholic beverages inflation, prone to transitory shocks, stood at minus 2,79 percent while the non-food inflation rate was 1,1 percent.

Monthly inflation in August came in at minus 0,31 percent, shedding 0,32 percentage points on the July rate of inflation.

This means that prices of goods and services moved by an average of 0,31 percent between July and August this year, the national statistical office said yesterday.

ZimStat said the month-on-month food and non-alcoholic beverages inflation stood at minus 0,81 percent in August 2014 shedding 0,35 percent on the July rate.

Economists said yesterday that Zimbabwe was likely to remain with low, but positive annual inflation rate after last month’s increase caused by a hike in utility charges.

“If you remember last month we had the load up factor of electricity and utilities factored in that figure (July annual inflation), which means there is a minute difference in rates because we are coming from a high base,” said Harare economist Mr Blessing Sagwati.

He said that producers had factored high operational costs due to utilities charges from Zesa, Zinwa, rental charges as well  as the effect of the garnishee orders by Zimra.

“The other factor towards depressed price movement pertains to product diversity and consumer resistance,” he said.

Mr Sagwati said the rate of inflation was likely to stabilise around the now prevailing low but positive rate at a time consumers were limiting consumption to basics.

He also pointed out that the fact that consumers were also doing most of their shopping in less formally structured retailers to avoid paying high prices, meant pressure on inflation was also set to remain generally stable.

Bulawayo-based economist Dr Eric Bloch said inflation marginally declined because there has not been significant upward movement in price of goods and services.

“There was little movement in prices, measured against the previous month. In the short term the prices will stabilise around these levels. Going forward it depends on what happens in agriculture,” he said.

Dr Bloch said if the country receives good rains in the period November to January next year, there could be better chance of maintaining low positive inflation rate.

“If we have good rains, we will maintain price stability, but if we do not, it means we will have to rely on imported products and we will see some inflation.”

Zimbabwe has had negative territory for the better part of this year, prompting conflicting reactions from economic analysts with some saying it was deflation, when prices keep falling, pushing inflation into negative zone.

Others however dismissed the school of thought claiming negative inflation was mere price correction as products sold in Zimbabwe were over-priced.

 

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