Year-On-Year Inflation Increases By 19,9 Percent

Source from:  The Herald (Harare) July 16, 2005  07/18/2005

ZIMBABWE'S year-on-year inflation for the month of June increased to 164,3 percent from 144,2 percent for May, representing a rise of 19,9 percentage points, the Central Statistical Office (CSO) said yesterday. This means that prices of goods as measured by the all items Consumer Price Index (CPI) increased by an average of 164,3 percent between June 2004 and June this year. In other words the average "bundle" of goods and services, normally purchased by households for domestic use, that used to cost $100 000 in June 2004 are now priced at $264 400. Last month's increase in inflation becomes the fourth time Zimbabwe has recorded an increase in annual inflation since January last year. On the other hand, the month-on-month inflation rate in June increased to 18,1 percent, gaining five percentage points on the May 2005 rate, which stood at 13,1 percent. It also follows that prices as measured by the all items CPI increased by an average of 18,1 percent from May to June 2005. CSO acting director Mr Moffat Nyoni attributed the increases to the rise in prices of postal services, primary and secondary education fees. Mr Nyoni said the items constituted the highest annual rates of inflation as the cost of postal services soared by 4 641,5 percent while that of primary and secondary education stood at 1 263,6 percent. The lowest rates of inflation were experienced in glassware, tableware and household utensils at 22,4 percent and bread and cereals at 54,9 percent. Transport, beverages and tobacco also contributed significantly to the annual inflation rate. The change in the average price of the basket from May 2005 to June 2005 was higher (18,1 percent) as measured by the change in the price index, than the change in average price of the same basket from May 2004 to June 2004 (9,2 percent). That explains the rise in the annual inflation for last month. Meanwhile, the CSO has published a new Consumer Price Index (CPI) with new weights and classification in accordance with international guidelines. The shift to the new Classification of Individual Consumption by Purpose (COICOP) has resulted in the increase in the number of sub-groups from 34 to 68 and that of major groups from 10 to 12. Mr Nyoni said a number of items in the CPI basket has also been increased from 337 to 428 which resulted in the CPI becoming more disaggregated. He, however, said there would be lack of direct comparison of certain sub-groups in the short-term. "For instance the major group 'transport and communication' in the previous classification was split into two separate major groups 'transport' and 'communication'," he said. A totally new major group called restaurants, cafes and hotels was also created under the new system. The implementation of the COICOP classification is also part of the harmonisation project of the CPI in different regions like Sadc. The system, if adopted by all member states, would enable inter country comparisons of the CPI and the rate of inflation. In the past 17 months, inflation has been falling from an all time high figure of 622 percent in January 2004, largely pulled down by the tight monetary policy adopted by the Reserve Bank in December 2003. To counter the mounting inflationary pressures in the post-election period, the central bank put in place a post election and drought mitigation monetary policy framework, which is expected to arrest the creeping disinflation pattern. In the review, the bank increased interest rates in order to choke the speculative tendencies that were coming back into the economy, which has seen the stock market, accused of fuelling inflation, falling by over 20 percent in the past three weeks. Enditem