Zim inflation drops due to weak rand

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A general softening of prices due to weakening of the South African Rand against the United States dollar is what saw Zimbabwe’s month-on-month inflation rate gaining 0,23 percentage points in August 2013 to -0,15 %, analysts say.

Taurai Mangudhla

Figures released by the Zimbabwe National Statistics Agency (Zimstat) this week showed prices as measured by the all items Consumer Price Index (CPI) decreased at an average rate of 0,15% from July to August, a month after President Robert Mugabe and his Zanu PF party won the general elections.

Analysts have argued the CPI reduction is entirely driven by the exchange rate and has nothing to do with the country’s political situation.

According to Zimstat, the CPI for the month ending August 2013 stood at 100, 28 compared to 100, 43 in July 2013 and 99, 02 in August 2012.

The Consumer Council of Zimbabwe (CCZ) said promotions ran by different supermarkets for a variety of goods, provided the mechanics through which the exchange rate effects filtered through to consumers.

“There are a lot of specials in supermarkets and at times prices will be low because there is a special offer and when you go back the next day or the next week they would have increased to the normal price.

So at times it’s very tricky when prices are on special,” CCZ executive director Rosemary Siyachitema said In an interview with businessdigest.

“For some products, at times prices also change depending on seasons, for example with vegetables.”

Siyachitema said whilst the marginal softening of prices could be attributed to the weakening of the South African Rand against the United States dollar, the market had not seen prices responding directly to the exchange rates.

“Retailers don’t pass on that benefit to the market so there is a weakness there,” said the CCZ executive.

She said the price of fuel had remained stable much to the benefit of the general pricing of goods.

In June, the Reserve Bank of Zimbabwe said the decelerating inflation trend for the first half of 2013 was on the back of depressed domestic economic activity and tight liquidity conditions.

The central bank said inflation was expected to remain low and stable, largely depending on the movement of international oil prices, the US$/Rand exchange rate developments, as well as fluctuations in the level of aggregate demand in the economy.

Zimstat’s latest report showed month-on-month food and non alcoholic beverages inflation stood at -0,90 percent in August 2013, gaining 0,24 percentage points on the July 2013 rate of -1,14 percent while the month-on-month non-food inflation stood at 0,23%, gaining 0,23 percentage points on the July 2013 rate of -0,004%.

On an annual comparison basis, the statistics agency said the year-on-year inflation rate or annual percentage change for the month of August 2013 as measured by the all items CPI stood at 1,28 %, gaining 0.03 percentage points on the July 2013 rate of 1.25 percent.

“This means that prices as measured by the all items CPI increased by an average of 1,28 percentage points between August 2012 and August 2013,” said Zimstat.

The year-on-year food and non alcoholic beverages inflation, prone to transitory shocks, stood at 0,94% whilst the non-food inflation rate was 1,44 %.

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