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Zimbabwe – Low inflation turns into deflation during February

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The Zimbabwe National Statistics Agency (Zimstat) has published its consumer price index (CPI) for February. The organisation measured a 0.48% y-o-y decline in the cost of the benchmark consumer basket, putting Zimbabwe back in deflation for the first time in four years. This comes after inflation readings of less than 1% y-o-y over the preceding five months and an average of only 1.6% during 2013.

In the past there have been questions over the quality of Zimstat inflation data. The Famine Early Earning Warning Systems Network (FEWS NET) recorded a 76% y-o-y and 43% y-o-y increase in the cost of maize grain prices during January in Bulawayo and Harare, respectively, while Zimstat’s bread & cereals index climbed by only 0.62% y-o-y. Private sector suppliers continue to be the largest importers of grains.

WHY DO WE CARE? The deflation situation is not surprising and was anticipated to materialise early in 2014. Weakness in the South African rand (enabling cheaper imports from Zimbabwe’s largest trading partner) and constraints on local hard currency supply have resulted in limited upward pressure on official consumer prices. We are at present not too concerned about questions over the quality of the overall inflation rate: the Consumer Council of Zimbabwe’s consumer basket for an urban family of six cost 1.9% y-o-y less during February. 

Analyst: Christie Viljoen

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