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Business editor
Latest figures from Zimstat show that the annual inflation for May was at 0,19 percent gaining 0,07 percentage points on the April rate of -0,26 percent as the drop in prices slowed down when compared to last year.
The month-on-month inflation rate in May turned negative at -0,13 percent after shedding 0,71 percentage points on the April rate of 0,58 percent.
The annual rate of inflation has been in negative territory for the fourth month running affirming that the economy remains and shall for the foreseeable future remain in a deflation pit.

This is more so as the liquidity crunch continues to tighten on the back of weak export performance, poor domestic revenue growth and virtually no access to fiscal or monetary tools on the part of Government to stimulate the economy from domestic sources.

Economists say the whole scenario is worsened by the continually depreciating SA rand which is the main determinant of import costs into the economy. SA sourced import prices will continue to soften, keeping Zimbabwe inflation in negative territory for the better part of the year.

Economists are divided on the subject of deflation; some suggest that the country is currently under price correction only where tradeables are concerned as the real value of the dollar has now set it. Others warn that it may reflect more aggressive discounting by, and reduced margins for, retailers in an effort to give sales a short-term boost.

“This clearly has not been a mere technical or price correction but has been in fact a more fundamental trend since disinflation set in the economy more than 30 months ago, said Miss Joanna Hwata, a markets analyst.

Some economists attribute part of the low inflation to waning domestic demand as income is contracting and economic players suffer the liquidity crisis.
“One good example is the property sector where the major players are reporting increasing rental arrears, increasing bad debt days and decreasing occupancy levels.

This points to lower demand for all forms of commercial space and is a good indicator of a fundamental slow down in the economy,” said Miss Hwata.
Food and non-alcoholic inflation for May stood at -3,75 percent from -3,73 percent last month as aggregate demand remains weak with consumers now directing most of their spending dollars to immediate necessities while the non-food inflation rate was 1,62 percent.

The month-on-month food and non-alcoholic beverages inflation stood at -0,30 percent gaining 0,16 percentage points on the April rate of -0,46 percent after pressures in the fruit and confectionery weight category. The month-on-month non-food inflation stood at -0,05 percent shedding -1,14 percentage points on April’s 1,09 percent.