FNB Namibia expects inflation to tick up slightly in June

FNB Namibia expects headline inflation to rise by 0.1 to 5.0 percent year-on-year in June. The bank further anticipates a slight decrease in inflation on a month-on-month basis of 0.1 percentage points to 0.2% in June 2024, primarily influenced by a 0.7% reduction in transport costs compared to the previous month. FNB Namibia economist Helena Mboti.

Mboti says the alcoholic beverages and tobacco category will significantly contribute to inflation, adding 0.96ppt to the headline rate in June, as projected by our model. Inflation within this category is primarily driven by the tobacco subcategory, which we expect to rise from 6.8% y/y to 7.1%. This increase is influenced by regional drought conditions affecting tobacco supply and the delayed impact of increased domestic tobacco prices due to sin taxes. Similarly, we expect core inflation to increase slightly from 4.2% y/y in May to 4.3% in June, partly due to trends in the alcoholic beverages and tobacco category.

Furthermore, the dry weather conditions will affect the food and non-alcoholic beverages category, likely adding 0.95ppt to overall inflation. We project inflation within this category, to remain almost unchanged at 4.7% y/y in May and June 2024, increasing by a marginal 0.3ppt. These price dynamics are influenced by persistent drought conditions impacting crop yields.F