Declining Food Prices Force Inflation Down

MONTH on month inflation declined for the first time since July 2006, official figures showed this week.
The last time month on month inflation declined was in July 2006 when it went down 1,2% the previous month. During the same period year on year inflation declined to 993,6% from 1 184,6%.

The Central Statistical Office (CSO)  — government’s preferred measure on inflation — on Tuesday announced that month on Month inflation for the January 2009 was -2,3%, and -3,1% for the month of February.

This means that a basket of goods and services that cost US$100 in December cost US$97,70 in January and US$94,67 in February 2009.

Prices of goods in Zimbabwe have stabilised over the past three months after government allowed the use of multiple currencies.

The decision was arrived at after monetary authorities failed to find a lasting solution to rising inflation, which was resulting in the local currency losing value against major currencies at an alarming rate.

Economist Brains Muchemwa said the decline was a result of the dollarisation of the economy.

“Month on month inflation is expected to continue declining in the short term. There is increased competition for goods which are now readily available on the market.

In such an environment it would not make business sense to price yourself out of the market,” he said.
Economic consultant John Robertson said the decline should be supported by production.

“For inflation to continue declining, all major sectors of the economy should increase production. The country also needs financial aid,” he said.

CSO however did not announce the year on year inflation figure for the seventh consecutive uninterrupted month.

The last official inflation figure was 231 million percent in July last year.
The last time official inflation figures showed a decline was in September 2007 when it dropped to 6 592,8% from 7 634,8% the previous month.

The retail price index — an alternative measure of inflation — was also not revealed.
CSO said an average family of five people needed US$552 in January for food, rent and other goods in order not to be deemed poor.

According to the Consumer Council of Zimbabwe (CCZ)’s February basket, food prices showed a
market decline of 20% from US$153,63 in January to US$122,65 in February.

The basket of food includes margarine, roller meal, white sugar, tea, fresh milk, cooking oil, bread, flour, rice, salt, onions, tomatoes and cabbages.

Despite falling food prices last month, rises in the cost of amenities such as electricity and water kept the cost of living for an urban family of six at US$374,25, from US$381,23 in January.

Food makes up 32% of the total basket while transport, rent, water and electricity, health services, education, clothing and footwear make up the balance.

Countering the fall in food prices was a rise last month in the cost of transport, rent, water, electricity, health, education, clothing and footwear as all sectors were dollarised.

According to the CCZ, a family of six needed US$239, a 12% rise from January’s US$214 for the non-food items.

“The cost of a number of services is still prohibitively high and these include rent, water, and lighting and these have pushed up the cost of the basket,” said the CCZ. –– Staff writer