Shopping in Lusaka
Shopping in Lusaka

The Zambia Institute for Policy Analysis and Research (ZIPAR) says the 6.4 percentage-point drop in the annual rate of inflation from 18.9% in September to 12.5% in October is genuine.

ZIPAR says Research Fellow-Public Finance Shebo Nalishebo said the Central Statistical Office inflation figures should not be doubted.

Mr Nalishebo told Journalists that focus of on the recent inflation figures is what economists call “year on year” inflation figures.

He said with the recent sharp drop in inflation, the end year single digit inflation rate target is attainable.

Mr Nalishebo said “year on year” compares the cost of goods and services in a certain month in one year (in this case, October 2016) to the same month the previous year (October 2015).

“In recent days, there has been some confusion about inflation in Zambia. On 27th October 2016, the Central Statistical Office (CSO) announced Some commentators have interpreted the drop in the annual rate of inflation as a fall in actual prices. Ordinary Zambians have been confused because when they go to the shops they don’t see falling prices. Far from it, they see prices still going up,” he said.

“Ordinary Zambians are not wrong. Prices are still going up. But the only thing which has changed is that the rate of increase is now slower than it was before,” he explained.

“In Zambia this how inflation is measured: the CSO gathers the average prices paid by consumers for hundreds of different items during the first ten days of each month, noting the prices of the same products so that over time they compare ‘like with like’.”

He said the average price of this representative basket of goods and services is what is referred to as the Consumer Price Index (CPI) adding that the CPI is calculated on a monthly basis and is then compared to a reference base period.

“Using the CPI, the CSO uses the differences in the CPI between two points in time to calculate the inflation rate for that period. Thus the Inflation rate measures the speed at which the prices of this basket of goods and services are increasing, not the prices themselves,” he said.

“The inflation rate can then be measured by comparing the changes in the CPI of a particular month to the CPI of the same month last year. This is known as year-on-year inflation and it is the headline inflation that is used by the CSO. The CSO also measures inflation by comparing the changes in the CPI in a particular month to the CPI of the previous month. This is called month-on-month inflation.”

Mr Nalishebo used the following example to illustrate this, think about a Zambian Mum doing her shopping after she is paid at the end of the month.

“In September 2014, she goes to the supermarket to buy food and other essentials and then passes by the local post.net shop to pay for utilities (water and electricity). She spends ZMW1,000 on her shopping. Between September 2014 and September 2015, the cost of these goods and services increases. This is largely because of the depreciation of the Kwacha. So by September 2015, the same shopping trip now costs Mum about ZMW1,200. This is an increase of 20%.”

“Between October 2015 and October 2016, the Bank of Zambia takes remedial action to combat this rapid increase in inflation. This means that while the cost of Mum’s shopping continued to increase, it did so at a slower rate than before. So between October 2015 and October 2016, the cost of the same basket of goods and services increased from ZMW1,200 to ZMW1,350. This is an increase of ZMW150, which gives an annual inflation rate of 12.5%.”

He added, “So, the rate of increase in the cost of Mum’s basket during the last 12 months [12.5%] is lower than the rate of increase during the 12 months prior to October 2015 [20%]. In other words, the inflation rate has fallen, but prices are still going up.”

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22 COMMENTS

    • Of course it is genuine. Only UPND cadres are in denial because they are wishing ill health to the Zambian economy so that they can have something to blame on Lungu

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  1. Who does this jargon benefit? Obviously not the mum. Actually the mum says just print more kwacha as it has run out of circulation. See her LOGIC?

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  2. Ati Dr habazooooook, cbu….. who can not understand meaning of the rate of change!’ This is the rate of acceleration. So it does not mean when inflation is at 12% then prices are not moving up, they are but at a slower pace,!!!

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  3. @ mm….prices always move up its not only in Zambia…it’s global but as you said the speed at which it’s rising is what inflation rate is and the slower it is the better

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  4. I beg to disagree with Nalishebo in his assertion that the increase in prices slowed down in the month of October 2016! To the contrary, the prices in October continued to increase at the same rate as the previous Months before it, except that the previous Months formulae were using lower dinominators than that used for the October 2016. Remember, we had exprienced a sharp increase in prices in October 2015? Those are the prices that have been used now to calculate the October 2016 CPI annual price movement index, the Inflation. Nothing to do with slowing down in price increments this year at all! To illustrate this fact, all one needs to do is to compute the monthly inflation rate October 2016 and then annualise it (* 12). It will certainly show that the rate of growth is similar to…

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  5. Inflation for other goods has fallen to 12%….
    However, the inflation for food stuff is at 23.4%…..
    Attaining a single digit inflation by end of this year is possible, some factors that can help with this goal are:
    Government spending into the economy (investing in building infrastructure ) this will help increase the aggregate demand as a result the GDP increase. This Method is used by all developed economies in the world.

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  6. Hopeless and meaningless statics, which mean nothing to an ordinary citizen. Who has gone without food right now as I write.

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  7. A 40 percent increase in fuel prices is a decrease in inflation?

    Does Lungu really think Zambians are that stooped?

    PF propaganda and lies! They can rig and steal elections, but it will not work on the economy. People know when they have no money in the pocket!

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  8. it’s not true and correct If every economic forecast were accurately completely , then every prediction of change in the economic variable under consideration will exactly be match the actual change that occurs in that quarter or year (YOY) but at least the key point is that the inflation mean forecast of inflation announcement must be within professional judgement free from biased and of WIDER RERESENTED BASKET OF ITEMS WEIGHTED PER ECONOMIC REGION UNBIASED

    At least when you plot the actual change in annual inflation on YOY with predicted there must be a correlation that can be seen clearly in the coefficients of determination and must nicely explain the…

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  9. other variables and support such as the GROWTH in the money supply Therefore the Inflation Projection announcement must be seen not to be biased of the data set in that basket to reflect and effect certain macroeconomic indicators desired

    You can see clearly the bias in these inflation forecasts calculations between YOY actual against predicted inflation, ideally your EXPECTED ERROR must be equal to ZERO (0) The judgement as to whether we have a bias or not should be based on the actual intercept of the inflation and the predicated Ideally between 0 and 1 the actual and the forecast When I take a sample of actual goods in Shoprite or SPAR…

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  10. and compare to the forecast YOY It’s Not ba ZIPAR The trend is on the upwards

    Keeping inflation low artificially or targeting as seen from , BOJ failures ,is not the best macroeconomic management as the other indicators will show that inflation projected is not correct and is biased

    There is no harm and consulting the American Statistical bureau to ensure we get the training and model correct

    In this case it’s not an accurate prediction but biased on the down ward side You can do the Test Statistics and see were the hypothesis are

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  11. This is what happens when everyone is compromised! October saw a steep rise in fuel prices which cascaded into price rises of most goods and services. In which economy does inflation drop against a rise in consumer goods and services? Please revisit statistics 110 ” How to Lie with Statistics!”.

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  12. Check ALSO the Bank of Zambia fortnightly statistical volumes from June 2014 to current 2016 its a good source of various statistical and see inflation impacting as a measure in those statistical economic indicators and see how biased this Lusaka CPI calculation is

    Ba ZIPAR its not correct prediction

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  13. This so called Research Fellow-Finance Shebo Nalishebo, said that figures by the CSO should not be doubted.”Ordinary Zambians are not wrong. Prices are still going up. But the only thing which has changed is that the rate of increase is now slower than it was before,” he explained.He has failed to give reasons why the rate of increase is now slower than before or in other words what is behind this slow increase, instead he quickly rushes into theories of how CPI is calculated. This is problem that permeates the Zambian academia they fail to add meaning to the data that is out there in the real world.

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  14. THEN THE TIMING OF THE MARKET IN CPI SHOULD BE WEIGHTED

    I LIKE FOLLOWING BA YALI NA BA ZIPAR THEY HAVE THE CONFIDENCE BUT A LITTLE BIT OF ASSURANCES AND ACCURANCY AND COMPLETENESS OF REASONING ALWAYS IS LACKING

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  15. LOOK THE MARKET SIGNALS AND CONFIDENCE IN THE RATES AND FRAME THE FORWARD LOOKING STATEMENT APPROPRIATELY THAT IS WHAT IS IMPORTANT NOT THE HISTORY ALSO

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  16. Inflation pronouncements should therefore be taken seriously as the measure and effect policy that afflicts the human soul People have borrowed to invest,pensioneers have longevity risk to worry about Government employees and private have salaries whose value should be inflation adjusted to ensure protection of income
    Inflation is not only an economic problems that is lightly pronounced but afflicts human soul Therefore forecasts and projections must be taken seriously The consequences are full blown and individual returns for invested impacted
    The best case to learn on effects of inflation and why it should be taken important and not gross over is GERMANY The…

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  17. hyperinflation of 1920s had grave consequences with at least 50 Million people starved and died
    So it should not be taken lightly We should learn from Chancellor Angela Merkel worry about inflation pressure because of its political ,social and economic implications that is MARKED in the quality of the CURRENCY kwacha

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  18. If inflationary pressures are not carefully embedded in commodities and assets You will see it in the dysfunctional society with increased unrests and hardships that is capable of making GOVERNANCE difficult for LUNGU

    So lets forecast and see the implications to effect appropriate policies

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  19. STOP THE NONSENSE.
    INFLATION SIMPLY MEANS RISING PRICES
    PRICES OF ALL COMMODITIES HAS GONE UP SINCE THE BEGINING OF THE THE YEAR
    OUR SALARIES PURCHSING POWER HAS DRASTICALLY DROPED.
    EG FUEL 30%, JCTR BASKET OF GOODS AND SERVICES, DSTV UP. SHOPRITE AND PICK N PAY PRICES UP
    YOU NAME IT THE PRICE HAS SKYROKETTED.

    NOW YOU TELLING ME INFLATION HAS DROPPED. THIS IS UTTER RUBISH

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