Central Statistical Office on Thursday 27th October 2016 announced a significant reduction in inflation of 6.5 percentage points that has raised more questions than answers. A drop from 18.9% in September to 12.5% in October when prices of commodities on the ground have remained high deserves explaining. There have been a number of concerns on the media and amongst the public.

Our observation like many others have observed is that the reported reduction in inflation does not indeed correspond to the current levels of cost of living. In fact Central Statistical Office has reported that prices of some commodities such as mealie meal have kept going up and so the reported reduction in inflation must have been influenced by other factors. While prices of some commodities may have reduced, it is doubtful that it could have caused such a significant reduction.

Like Central Statistical Office has intimated, the reduction in inflation has been driven by the ‘base effect’ and not so much the reduction in actual prices. The base effect is defined as the consequence of abnormally high or low levels of inflation in a previous month distorting the headline inflation numbers for the most recent month.

Looking at 2015 October inflation increased from 7.7% to 14.3%, at the same period the JCTR’s BNB for Lusaka passed the K4,000 barrier for the first time from K3,957.46 to K4,249.56. Such a shock is what is being referred to in the base effect definition.

Since inflation is calculated as a difference between the same month in the current year and that of previous year, the differences before this month of October have been relatively higher – causing inflation to be higher.

But from October we expect the differences to be lower since this is the point at which inflation drastically rose in 2015 and we have since been having prices that are around the same range. To illustrate this numerically we look at the BNB figures from last year and compare them to this year (giving an estimate for October BNB since BNB data for the month of October has not yet been analyzed).

inflation

Note: Inflation here is calculated with BNB figures for Lusaka as opposed to nationwide figures as done by the CSO for illustration purposes only.

Thus, the reduction in the October inflation is not necessarily a result of actual prices of goods and services reducing but because we are now calculating inflation over the period when it has been significantly high and therefore, similar to current prices. In other words, the rate of change of prices between October 2015 and October 2016 has reduced even though the cost of living remains high. It should also be noted that the recent increase in the cost of fuel has not been captured in the October inflation statistics but will surely be reflected in the November inflation statics. This is due to the time lag of pass through effects on fuel price adjustment.

The JCTR thus urges government and the Central Statistical Office to adequately explain these facts to the common man to avoid misinformation and the credibility of the CSO coming into question. Further, the Centre, calls on government to in its economic recovery plan to critically address the adverse effects of subsidy removal on the poor and work using the saved funds transparently in a manner that will benefit the poor and the nation as a whole.

For more information, contact the Social and Economic Development Programme of
The Jesuit Centre for Theological Reflection, P.O. Box 37774, 10101 Lusaka, Zambia
Tel: 260-211-290-410 Fax: 260-211-290-759 E-mail: [email protected] Webster: www.jctr.org.zm
Or www.openbudgetsurvey.org, Location: 3813 Martin Mwamba Road, Olympia Park, Lusaka

[Read 85 times, 1 reads today]
Loading...

29 COMMENTS

    • There are people who wish the economy ill.

      They think it will create political opportunity for them – never!

      They are not able to rule the country. Let them just concentrate on business and animal husbandry.

      0

      0
    • This is good still. So many positives to draw from this. Time we hit the single digit inflation rate

      0

      0
    • Dont mix economics and cadrelism!! Economics is numbers, facts and formulae unlike cadrelism were drinking, dancing and lies are the rules

      1

      0
  1. Has CSO been infiltrated by PF cadres as well? As usual PF thinks that talking down inflation will reduce the cost of things!

    0

    0
  2. UPND and PF cadres, could you not comment on economic topics, in fact do not comment on any topics you cannot logically comprehend. Inflation falling shall not naturally translate into lower cost of living, especially in a landlocked single GDP monopoly channel nation.

    0

    0
    • @ Nzelu, do as you preach. Economics and you do not have anything in common. Copy and paste of specific passages does not make you “knowledgeable” or “expert”

      0

      0
  3. Before this discussion degenerates into donkey talk, let me add my comments to the observation by JCTR. Let us interpret economic theory well and muslead the common man. In economic theory, a reduction in the rate of inflation DOES NOT MEAN a reduction in prices of goods and services, it simply means that prices ARE rising but at a slower rate. That is the simple explanation of inflation. Don’t listen to so called economists who possess degrees but in fact do not understand such basic theories. Look out for donkeys that want you to believe otherwise…you know the donkeys don’t you? To give you a hint, they spend a lot of their time in courts of law. Git it?

    0

    0
    • Yours every single contribution becomes donkey talk. Give your brain chance to understand before commenting and showing your inbred 1mbecility.

      0

      0
    • Terrible its time we advice you we the founders of LT.You are losing truck stick to real issues don’t call a human like HH a Donkey.If you continue God’s finger will strike you.Those are my words.

      0

      0
  4. You may also wish to tell the donkeys that in economic theory no inflation is not welcome hecause it means the economy is neither vibrant nor growing at all. So a balance is required at the right numbers….I am available to offer lessons to those UPND cadres who want to wean themselves from donkey theories.

    0

    0
    • You are really an ass!

      Go make your donkey noises on the farm with Benjamin.

      There you can chant your “Four legs good, two legs bad.” slogan all day.

      This site is for humans, not animals like you.

      0

      0
  5. COOKED UP POLITICAL STATISTICS… DUNUNA IYEEEEEE AYEEEEEE KIKIKI ALA KUTI WASEKA. WE WARNED YOU. WE TOLD YOU VOTE WITH YOUR BRAIN ATI NO HH WANTS TO STEAL. HOW DOES A SUCCESSFUL MAN STEAL FROM EMPTY COFFERS KIKIKI NOW WITH PF THEY ARE STEALING THE LITTLE YOU HAVE IN BROAD DAY LIGHT. STUUUPID ZAMBIANS. WAKE UP

    0

    0
  6. Wow, RB truly was a saint in steering the Zambian economy.During his time inflation was low,forex reserves high,debt was low ,maize was a surplus,Fitch ratings were BB+, and economic growth was 6% and up.

    Now with PF we get cooked inflation figures,IMF bailout, 3rd hungriest nation,high debt and economy slowed to 3%.

    0

    0
  7. grade six civics: inflation – too much money chasing few goods
    deflation- fewer money chasing many goods
    sounds like we are in the later situation to my grade six girl. any correction?

    0

    0
  8. The PF kaponyas will spin the single digit inflation while we have people starving and people with no jobs while the exchange rate remains high and beyond their lies.

    Yes ladies and gentlemen they will use all sorts of lies to squeeze the single digit inflation while our people suffer but as a clue use the exchange rate. Not the lungu rate of inflation.

    0

    0
  9. Yes ladies and gentlemen don’t belive the lungu rate of inflation cooked up at the back state house which want single figures while our people suffer. instead look at the exchange rate for how well our economy is performing, they tried to throw dollars to make the exhange rate look good during elections but it was like putting water in a bucket with holes. The rotten import based economy we have can’t hold it’s own against the dollar.

    0

    0
  10. @6.1 Snow ball, that is exactly my point and objective, to encourage sensible debate as expected among humans. What I am saying is that human beings set the rules for political, social and economic discourse in this country and we must not allow our fellow humans to degenerate into donkeys. Or even pigs like you from Animal farm.

    0

    0
  11. But, who said that a drop in the inflation index is the same as a reduction in prices? It is the annual index, the cost increases metric, that has dropped in value, but not the cost of living which, infact, has increesed by 12.5% from October last year, 2015. The decline by 6.4% simply tells us that in October last year there was a sharp increese in prices of 6.4%, over and above the usual increments! This trend of apparent declines in the statistic will continue to manifest until the effects of last year sharp increments are exhausted, after which the downwards trend will cease and then we should then start seeing increments again. So, expect a ‘drop’ in the Index again in the next three months. Remenber, these are simply declines in the value if the Index, and not declines in the cost…

    0

    0
  12. zambians, read. Dont waffle. Numbers never lie. When CSO says, it collects prices information from 1st to 10th days of every month, how in your own intellectual faculties, expect information on prices changes effected after 10th to be reflected in inflation?

    0

    0
  13. Lungu can manipulate the CPI but the fraud will manifest thru the exchange rate and interest rates. Already Zambian banks are charging their customers between 40% and 60%.

    0

    0

Comments are closed.