THE year-on-year inflation rate hit 4, 29 % in July 2018 from 2, 91% in June 2017, an increase of 47.48% in the Consumer Price Index (CPI) which measures changes in the general price level, driven mainly by food and non-alcoholic beverages, according to the Zimbabwe National Statistical Agency (ZimStat).
BY FIDELITY MHLANGA
In month-on-month terms, food and non-alcoholic beverages inflation rate stood at 0, 74 % in July 2018, gaining 0,97 percentage points on the June 2018 rate of -0,23 %. The non-food inflation rate also gained 1,05 percentage points to 1,09 % on the June 2018 rate of 0,04 %.
All items included, the CPI increased by an average rate of 0,98 % from June 2018 to July 2018.
In annual terms, non-discretionary items were the biggest source of price pressures.
“The year on year food and non-alcoholic beverages inflation prone to transitory shocks stood at 6,35 % whilst the non-food inflation rate was 3,33 %. The month on month inflation rate in July 2018 was 0,98% gaining 1,03 percentage points on the June 2018 rate of -0,05 %,” Zimstats said.
After three years of deflation since February 2014, Zimbabwe experienced a resurgence in inflation in February 2017 after year-on-year inflation for the month rose to 0,06% from the January rate of -0,65%.
The annual inflation opened the 2018 year at 3,52% and tumbled to 2,68% in February and March before gaining to 2,71% in April and May.
Confederation of Zimbabwe Retailers economist Clemence Machadu said the gain was pushed by persistent government deficits, recently worsened by unbudgeted wage cost adjustments for civil servants’ salaries just before the 2018 harmonised elections held last month.
“The increase was mainly propelled by a number of factors, including salary increases that were granted to members of the civil service. The salary increases were not backed by production and created additional demand at a time when producers are struggling to get adequate foreign exchange to recapitalise and import critical raw materials to enhance capacity,” he said.
“This, coupled with other government expenditures ahead of the watershed elections, resulted in the excessive demand for foreign currency required to replenish stock against limited supply. Resultantly, black market rates shot up and some producers and retailers who rely on the parallel market were faced with higher premiums, which they apportioned to the final consumer.”
Machadu said the South African rand which was rising to the greenback, rendered imports from across the Limpopo cheaper and contributed to inflation. “This created more demand for the US dollar locally and that also worsened supply ability, which created more shortages of the US dollar, with the parallel market cashing in through usurious and punitive premiums that put upward pressure on inflation,” he said.
Labour and Research Institute of Zimbabwe Retailers’ Prosper Chitambara said the released data did not tally with what is obtaining on the ground.
“The statistics do not reflect what is on the ground. They don’t take into account what’s on the unofficial market. They tend to be conservative and understate the levels of price increases,” he said.
Chitambara projected that, based on Zimstats conservative forecasts, the annual inflation rate would reach 6% by year-end.