07-19-17 by Spotlight Zimbabwe

Zim inflation makes surprise U-turn

Malcom Sharara

Harare – Zimbabwe’s inflation made a surprise U-turn in June, giving respite to the Reserve Bank of Zimbabwe (RBZ) whose currency initiatives have been blamed for the upward trend in inflation in recent months.

The RBZ’s introduction of bond notes, in an effort to address cash challenges, has resulted in a three-tier pricing system, seen by many as inflationary.

The inflation rate for June slowed down to 0.31% from 0.75% in May, after recording a 0.27 percentage point gain on the April 2017 rate of 0.48%.

Inflation on actual rentals and clothing weighed on overall inflation, with rental inflation coming out at -7.95% while clothing inflation was -1.15%. Property rentals have been under pressure in Zimbabwe, with tenants negotiating existing contracts or downward rental reviews.

Second-hand clothing causes problems

Importation of second-hand clothing is also putting pressure on prices, resulting in the negative inflation on clothing. Last month clothing retailer Edgars Stores said the importation of second-hand clothes has compounded the woes of the local textile industry and squeezes retailers’ margins.

The group’s managing director Linda Masterson said there is a need for government to control importation of cheap used clothing into the country, as this is affecting formal businesses that pay tax.

Food inflation, which has a huge weight on inflation, has however been on a steady rise.

“The year-on-year food and non-alcoholic beverages inflation prone to transitory shocks stood at 1.82%”, Zimstats said.

The upward pressure on inflation was dominated by food items such as bread and cereals (2.56%), meat (1.89%), fish and seafood (3.89%), milk, cheese and eggs (1.6%%) and sewage collection (5.2%), among others.

The month-on-month inflation rate also declined to sub-zero (-0.24%), shedding 0.27%.

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