Thursday, November 18, 2010

From John Robertson

Zimbabwe’s October's inflation figures show a month-on-month increase of 0,22%, which carried the index number up to 95,27. As this figure was 91,96 in October last year, the year-on-year inflation rate works out at 3,6%.

Prospects for change in the coming year seem likely to be driven mostly by wage demands and by movements of the rand against the US dollar. On the local increases in labour costs, the faster rate of increase in affected consumer goods prices might not impact on the prices people pay if they can choose a more competitively priced imported product. Local producers seeking to recover higher labour costs are therefore more likely to price themselves out of the market than to add to inflation. However, the loss of jobs for those companies that fail will cause a shrinkage in local buying power as well as in the taxes paid to government and the local authorities.

The rand exchange rate appears to be settling into a pattern of minor adjustments between R6,8 and R7,10 to the US dollar. The news a week ago that the US is to print another $600 billion to ease the liquidity has cast the US dollar’s recovery prospects into a deeper shadow, so perhaps a weakening rand is still some way off. Meanwhile, Zimbabweans will be spending mainly weaker US dollars to pay for goods priced in strengthening rand, so our import procurement costs are more likely to go up — unless we can source the goods from local suppliers. Zimbabwean factories should be trying to recapture the loyalty of local retailers now, while the rand is strong, and industrial workers will be more likely to keep their jobs if they can restrain their wage demands and improve on their levels of productivity.

No comments:

Post a Comment