The national inflation went up last month mainly driven by high commodity prices, data showed on Thursday.
Statistics Botswana said the August 2011 national year-on-year inflation rate stood at 8.7 percent, up by 0.9 of a percentage point from 7.8 percent in July.
The main contributor, however, was the 3.7 percent monthly rise in the Transport sub-index, which makes up 18.98 percent of the total weight of the CPI basket.
The increase was mainly driven by an 8.6 percent and 4.7 percent increase in the Transport Services and Operation of Personal Transport components, respectively.
Transport service component rose due to a 10 percent increase in taxi fares while the Operation of Personal Transport increase was as a result of a P0.50 rise in the retail pump prices for both petrol and diesel, effected on 19 August 2011.
The next highest contributor to the overall year-over-year increase over the first eight months of 2011 was the food and non-alcoholic beverages group.
This sub-index, which accounts for 21.84 percent of the representative consumer basket, increased by 0.5 percent on the month and 7.1 percent year on year.
The increase was mainly driven by an increase in all the components of the sub-index with the Fruit component rising by 2.3 percent over the month.
Invetec analyst, Carol-Jean Harward, said the upward movements are not all that surprising given that commodity prices have remained stubbornly high.
“The higher cost of living is putting impossible pressure on working people that face higher food and fuel prices as well as electricity prices. In line with our relatively bearish view on inflation, we expect inflation to end the year at 9.7 percent,” Harward said.
“The current “soft patch” and the uncertainty facing global markets, however, overshadow the rising inflation number and should force the MPC (Monetary Policy) to tread carefully so as to avoid policy errors,” she added.
Despite the spike in inflation, Investec said it expected the MPC to maintain their accommodative stance as they adopt a “wait and see” approach to observe how the global market recovery pans out.
“With an expected “somewhat” stable global recovery in the second half of next year coupled with inflation hitting 9.5 percent in the first half of 2012, Bank of Botswana will be impelled to start removing policy accommodation in the later months of 2012,” Harward said.
“With that being said, the longer the global recovery takes, the more pressure there will be on the MPC to keep rates low and the higher the possibility of a rate cut.”
Statistics Botswana added that the urban villages’ August inflation rate was 8.9 percent, up by 1.2 percentage points from the July rate of 7.7 percent. The rural villages’ inflation rate recorded an increase of 1.2 percentage points between July and August; from 6.3 to 7.5 percent.
It said the cities and towns’ inflation rate rose by 0.7 of a percentage point, from 8.4 percent in July to 9.1 percent in August.
The August 2011 national Consumer Price Index was 150.8, up by 1.0 percent on the July index of 149.3. The urban villages’ index recorded an increase of 1.1 percent between July and August 2011; from 148.3 to 149.8.
The cities and towns’ index went up by 1.0 percent from 148.9 in July to 150.4 in August, while the rural villages’ index moved from 152.3 to 153.4 over the period, recording an increase of 0.7 percent.
“Although inflation is expected to rise in the short term due to the effects of rising food, fuel and administered prices, it is expected to dissipate during H2 2012 towards the BoB 3 ÔÇô 6 percent objective range as the effects of some of the increases will drop out of the inflation calculation in June 2012 and beyond, assuming no further increases,” said Motswedi Securities.