Headline inflation decelerates further in May
Less pressure
FNB is of the view that with core inflation remaining elevated, inflation will rise gradually through the remainder of 2025
Namibia’s headline inflation eased further to 3.5% y/y in May 2025, down from 3.6% in April and 4.9% a year earlier. The moderation was largely driven by transport inflation,which fell to -1.3% year-on-year (y-o-y) in May due to a steep drop in the operation of personal transport equipment subcategory (-3.3%), FNB Namibia economist Helena Mboti noted.
"As reported by the NSA, the subcategory reflected a sharp decline in fuel inflation from 13.7% to -7.8% y-o-y, and a slowdown in spare parts inflation to 1.4% y-o-y. As a result, transport’s contribution to the y/y headline inflation turned negative at -0.2 percentage points (ppts), compared to +1.2 ppts in May last year.Similarly, housing, water, electricity, gas, and other fuels inflation softened to 3.6% y/y in May (April: 3.8%), reflecting lower-than-expected utility costs and subdued demand for mortgage credit, partly offsetting upward rental pressures. Despite the moderation, this category remained the second-largest contributor to headline inflation at 0.9 ppts," Mboti said.
In contrast, despite remaining the largest contributor to the headline rate at 1.2ppts, food and non-alcoholic beverages inflation rose to 5.8% y/y in May (April: 5.6%). The increase was driven by sharp gains in meat (+8.8%) – notably beef (+12.6%), minced meat (+10.2%), and lamb (+10.3%) – alongside oils and fats (+9.1%) and fruits (+15.5%). Meanwhile, alcoholic beverages inflation, though lower than the 6.6% recorded in May 2024, edged up to 5.8% y/y in May this year from 4.9% in April, continuing to exert notable upward pressure (0.8ppts) on overall inflation. "These trends reflect ongoing livestock supply constraints as observed in the drop in the total number of cattle marketed in 2024, limited regional agricultural output, and elevated import costs," Mboti said.
"On a month-on-month basis, inflation held steady at 0.2%. Core inflation rose to 4.1% y-oy- in May, up from 4.0% in April, and has remained above headline inflation since late 2024. This highlights entrenched price pressures in services, rentals, education, and alcohol, despite prices trending lower. This suggests that inflation may settle higher than 3% indicating that recent disinflation may be temporary, particularly if transport prices reverse," she said.
"We expect inflation to ease further to 3.3% y-o-y in June, supported by favourable fuel base effects and muted utility inflation following NamPower’s lower-than-expected 3.8% tariff increase. With core inflation remaining elevated, we maintain our view that inflation will rise gradually through the remainder of 2025, albeit at a slower pace than previously expected, and in this regard, we expect inflation to end the year at 3.8% in December. However, risks remain tilted to the upside, particularly from the ongoing risk of global trade disruptions, volatile food prices, and persistent rent inflation, which may limit the pace of disinflation in 2025," Mboti said.