Thursday, January 21, 2010

Consumer Price Index

Please contact me for a copy of the table
The detailed Consumer Price Index table updated to December is attached. With apologies, I made a typing error in my report yesterday, in which I said that food prices in December 2009 were 15,8% lower than in December 2008. I should have typed 15,08% down. In the table, the figure shown is correct, although rounded off to one decimal place to 15,1%. I have carefully checked the columns in the attachment and believe I have not slipped up again! However, the published table’s calculated monthly or annual percentage changes do occasionally differ from mine in the second decimal place position. Their rounding off from three or four decimal places down to two occasionally results in small gaps.Now that we have the ability to calculate annual changes, we can see that prices have come down for many imported items, but many of these changes stem from the mis-aligned foreign currency values that were firmly in place a year ago and for many months before the end of 2008. Shopkeepers also had to depend on cross-border traders, most of whom were unable to obtain the foods at wholesale prices, so the mark-ups in Zimbabwe were on retail prices and were pushed up further by the relatively less efficient way and means employed by cross-border traders. All of these costs were able to come down when local stores were able to place direct orders with South African wholesalers and manufactures, and all of them were obliged to bring down local selling prices as competition between supermarket chains and other retailers became stronger.For these reasons, the first four months of 2009 might best be seen as periods of adjustment, and when we have put the first four months of 2010 behind us, the year-on-year inflation figures from then will have more meaning. We closed 2009 with an average inflation rate of minus 7,7%, but from April this year it is likely that the negative numbers will start moving quickly into less comfortable positive inflation rate figures. Because of the contrast against the low index numbers reached by June 2009, it appears likely that the rate by June 2010 will reach or exceed 5%.Another of the changes a year ago was that the rand started strengthening against the US dollar, as as most of Zimbabwe’s have been paid for with weakening US dollars, but bought in South Africa, the changes added to Zimbabwe’s import costs. This year the changing relationships between the currencies Zimbabwe has come to depend on could have an important bearing on Zimbabwe’s procurement costs.From the annual inflation figures shown against the individual items in the more detailed breakdown, it can be seen that typical supermarket items came down by significant percentages, as did small tools, hospital services and wine. The increases appear to mostly lie in the areas dependent on local suppliers, the highest being dental services at 141%. Labour costs have caused membership fees at recreational facilities to rise and hairdressers are charging more, but exceptions are imports of fuel and lubricants, which increased by more than 50%, and telephone equipment, which rose by 147%. I hope the table proves helpful.,John

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