HomeBusinessInflation to increase in second quarter of 2016

Inflation to increase in second quarter of 2016

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ANNUAL inflation is projected to increase marginally in the second quarter of 2016 averaging -1,12% to about -1%, the Zimbabwe Economic Policy Analysis and Research Unit (Zeparu) has said.

BY TARISAI MANDIZHA

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According to the 20th edition of the Zeparu Economic Barometer report, in the first quarter of 2016, notable declines were witnessed in the prices of meat products, house rentals and liquid fuels, while increases were noted in fees for pre-primary and primary education.

“We expect annual inflation to increase marginally in the second quarter of 2016 averaging -1,12%. Thus inflation is forecasted to increase marginally from -2,3% in March 2016 to about -1%in June 2016. We expect that any deviations from the forecast to be within the range of the upper and lower limit at the 95% confidence level,” Zeparu said.

On a year-on-year basis, annual inflation stood at -2,19% in January 2016, before marginally declining to -2,22% in February 2016 and further to -2,31% in March 2016.

Annual inflation averaged -2,24% in the first quarter 2016 an increase by 0,5 percentage points from -2,74% recorded in the fourth quarter 2015, mainly driven by the decline in food and non-alcoholic beverages inflation with notable declines being witnessed in the prices of meat, liquid fuels and house rentals.

According to the report, the fall in the price of meat products was mainly due to increased supply, as farmers dispose of their livestock’s due to a shortage of pastures and feed stocks induced by the current drought, the price of fuel continue to be adjusted downwards in line with trends on the international commodities market, while house rentals declined on the back of low uptake of residential accommodation space.

Zeparu, however, said, despite the marginal decline in annual inflation, increases were noted in the fees for pre-primary and primary education.

The report also indicated that upward pressures were expected on educational fees, as well as on prices of food items due to a poor harvest, as a result of the El Nino induced drought. It said annual inflation was expected to continue in the negative in the short-to-medium term aggravated by weak aggregate demand, which has seen manufacturers adjusting prices in order stimulate demand.

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