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Inflationary pressures to persist

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Cost-push inflationary pressures are expected to persist in the fourth quarter of this year as the manufacturing sector remains fragile. The country is likely to miss its 4,5% inflation target by December, a local research firm has said.

Year-on-year inflation rate in the month of September increased to 4,3% from 3,5%, gaining 0,8 percentage points from August 2011. Month-on-month inflation rate was 0,8% gaining 0,7 percentage points on the August rate of 0,1%.

Cost-push inflation is a type of inflation caused by substantial increases in the cost of important goods or services where no suitable alternative is available.

According to an Interfin Securities’ third quarter review of the equities market, the manufacturing sector remained fragile as the country is a net importer of most basic commodities and capital goods.

“This has also left the country exposed to exchange rate risks as currencies of its major trade partners are strengthening, especially emerging markets currencies,” reads part of the report.

“Higher utility costs, especially after the 31% electricity tariff hike by Zesa, will lead to more cost-push inflation as firms will endeavour to pass on the increased costs through higher prices to the consumer.

“We still maintain the 4,5%inflation target by the Ministry of Finance is likely to be missed. We believe the current account and Budget deficits are likely to increase until new measures are put in place to curb rising government expenditure, especially consumptive expenditure which has come at the expense of capital expenditure.”

Interfin said the economy was also likely to miss the envisaged 9,3% economic growth rate for 2011 and estimated it would register a growth of 7,8% and 8%.

Recent statistics by the Consumer Council of Zimbabwe show the monthly basket for a family of six increased by $527,52 from $505,06 reflecting a 0,04% increase. Consumer goods price increases were registered in the following products — cooking oil by 13c, mealie meal by 30c, tea leaves by 25c, rice by 4c, washing soap bars by 25c and washing powder by 4c.

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