Friday, July 10, 2020

Consumer inflation shifts gears, picked up pace in April

A steep rise in electricity charges and disruption to food supplies helped push up consumer prices, with the monthly change in prices accelerating at higher pace since 2018. 

Inflation data from Statistics Botswana shows that the monthly change in prices between March and April was 0.9 percent, the second largest growth pace since April 2018’s 1.3 percent. The growth helped push the annual inflation rate to 2.5 percent in April, up from the 2.2 percent rate that has been constant since December. 

The inflationary prices in April were largely due to the 22 percent increase in the electricity tariff that was effected beginning of the month. Furthermore, the country was placed in a nationwide lockdown, an effort by the government to slow down the spread of coronavirus, but inadvertently affected business activities.   

Though some business were closed for much of April, the lockdown caused panic buying and limited supplies, resulting in shortages and rise in prices in some constituents of the consumer price index (CPI) – which tracks changes in prices. There was notable growth in prices for perishables such as fruits, meat and milk products. 

The surge in the consumer prices in April might not even reflect the full picture as the collection of data was hampered by the lockdown. The government data agency said it resorted to an imputation method, using the best available observed prices data to provide an unbiased estimate of price movement.

“The price collection for April data, was largely affected by recent developments of coronavirus (COVID-19) lockdown, which was declared on the 3rd of April 2020 in Botswana. Prices data collection was done through emails and telephone because of the COVID-19 restrictions and it covered approximately 70 percent of items in the CPI basket,” Dr. Burton Mguni, the statistician general, said in the monthly report. 

He added that the most affected sections in the CPI Basket were alcoholic beverages, clothing and footwear, where outlets were closed to comply with social distancing rule. 

“The closure of outlets has resulted in a number of unobserved prices. All missing unobserved prices were imputed using geometric mean of price variation of the observed prices,” he said, adding that the approach was in accordance with the international CPI methodological procedures by the International Monetary Fund. 

Mguni says once the prices become available, the index will self-correct to reflect the closest estimate of the price changes during the period. 

This week, Tebelelo Pule, the chief executive officer of Competition and Consumer Authority, disclosed that their surveillance has uncovered a rapid rise in prices of some food stables, signalling that the inflation rate might be higher than the current figure. 

She warned distributors and retailers from arbitrarily increasing prices at a time when the country’s borders remain partially closed, only allowing for movement of essential supplies. However, some retailers said the increase in prices is unavoidable given the disruption to global supplies amplified by strict measures taken by countries to curb the spread of Covid-19, the disease caused by coronavirus. 

Inflationary pressures are expected to remain in the coming months, pushing the inflation rate up  but should be at the lower rung of Bank of Botswana’s medium objective range of 3 – 6 percent. The country is coming from a period of low inflation from nearly a decade of falling prices, exacerbated by subdued domestic demand alongside the rise in unemployment and limited growth opportunities. The country’s average inflation rate was 2.8 percent in 2019, down from 3.2 percent in 2018 and 3.3 percent in 2017.

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Sunday Standard July 5 – 11

Digital copy of Sunday Standard issue of July 5 - 11, 2020.