Thursday, December 3, 2020

Consumer Inflation ticks up

Consumer prices in Botswana rapidly rose in September after they edged down to historic lows, shows latest data from Statistics Botswana.

The annual inflation rate was 1.8 percent in September, almost doubling from August’s 1 percent rate, which was also an uptick from the record low 0.9 percent registered in June and July – the lowest recorded rate since 1975.

The biggest monthly increase of consumer prices in September was recorded in the  transport group index, which at 23.43 percent has the biggest weight in the consumer price index (CPI), which tracks the price of a basket of goods and services that is intended to represent average consumer patterns. The 3.2 percent rise in prices in the transport sector was due to increase in public transport fares which were implemented beginning of September.

Prices of the housing, water, electricity, gas and other fuels group index, which has the second biggest weight of 17.45 percent in the CPI increased by 0.4 percent. This has been attributed to the rise in prices of building materials. There has been shortage of cement in the country due to hiccups in logistics, with goods delayed for weeks at borders as cross border drivers await test results for Covid-19.

The food and non-alcoholic beverages group index which has a weighting of 13.55 in the consumer basket rose by 0.2 percent due to increase in costs of vegetables and bread cereals.

While overall prices might have risen by only 1.8 percent and have been at record lows for much of the year, way below the Bank of Botswana’s objective range of 3 – 6 percent, the numbers do not truly reflect the reality of rising prices amid a pandemic, where costs have increased for basic needs and commonly used services faster than what the inflation rate reflects.

In the past six months, prices of food have risen by 2.1 percent and 4.2 percent in a twelve-month period. Alcoholic beverages and tobacco prices have shot up 5.3 percent in the past six months and on a yearly basis, they have edged up by 6.2 percent. Costs have also gone up housing, water, electricity, gas and other fuels, registering 5.7 percent in the past six months and 6.4 percent on a yearly comparison. Much of the rise in prices in this sector was due to the government’s decision to increase electricity tariffs by 22 percent in April 2020.

The distortion to the inflation rate has largely been due to the transport sector, whose constituent prices are largely administered by the government. This is also the sector that has the largest weighting, which means when there is a change in transport prices, it affects the overall inflation rate by a bigger margin. The inflation rate has been kept low mostly by reduction in fuel prices, while public transport fares have been unchanged for a while until recently.

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The Telegraph December 2

Digital edition of The Telegraph, December 2, 2020.