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August inflation gains 0.18 percentage points to -1.43%

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HARARE


The country’s annual inflation rate for August gained 0.18 percentage points but remained in the negative at -1.43% from the July rate of -1.60%.

According to data from Zimstat inflationary pressures were seen in the Non Food category in particular education in preparation for the new September school term.  The year on year Non Food inflation rate was at -0.54% while Food and Non Alcoholic beverages inflation stood at -3.34 percent.

In his mid-term Monetary Policy Statement yesterday, Reserve Bank of Zimbabwe governor noted that with inflation at -1.43% being in negative territory since 2014 and the public sector wage and salary bill taking up most fiscal space, expenditure for capital and social projects have been crowded out and this has undermined the economy’s capacity to enhance employment and to be competitive.

The deflationary pattern on the CPI further consolidates a pattern that set in in mid-2013 and continues to date underpinned by the sustained depreciation of the South African rand (August 2016: 14.11 vs August 2015:13.29); subdued international oil prices; and waning domestic demand due to reduced Government spending (priority mostly being given to salaries and servicing treasury bills maturities).

While the general price decline in goods and services is good for consumers, policies that stimulate aggregate demand and improve liquidity should be implemented. Historically deflationary periods are often periods of rising populist backlash as they are often accompanied by high unemployment and a real debt burden on companies which reduces the spending power of firms.

The month on month inflation rate in August was -0.13% gaining 0.06 percentage points on the July rate of -0.19%.

The month on month Food and Non Alcoholic Beverages inflation stood at -0.31% gaining 0.21 percentage points on the July rate of -0.52 percent.

The month on month non-food inflation rate stood at -0.04% shedding 0.01 percentage points on the July rate of -0.03%.

According to the Ministry of Finance, annual average inflation for the year is projected to be -0.4%, up from -2.4% recorded in 2015.

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