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Inflation remains in the negative

YEAR-on-year inflation for the first quarter of 2016 continued in the negative territory, exerting pressure on manufacturers to reduce consumer prices to stimulate demand.

BY OUR STAFF

Statistics from the national statistical agency, Zimstat, show that year-on-year inflation for the month of March 2016 as measured by all items on the Consumer Price Index stood at -2,31%, shedding 0,09 percentage points on February 2016 rate of -2,22%.
This means that prices — as measured by the all-items CPI — decreased by an average of -2,31 percentage points between March 2015 and March 2016.

In February year-on-year inflation stood at -2,22%, while in January the figure was -2,19%, gaining 0,29 percentage points from the December 2015 rate of -2,47%.

A Harare-based economist said industry would continue suffering because of negative inflation as the reduction in prices might not be sustainable.

“Local manufacturers are under pressure to reduce prices going forward. Some margins are very low and that will not be profitable for manufacturers. Consumers will benefit in the process as the dollar will be buying more,” he said.

The manufacturing sector has been facing various challenges that include low business confidence, stiff competition from imports, low capacity utilisation and high production costs.

In his monetary policy statement, Reserve Bank of Zimbabwe governor John Mangudya said the central bank was committed to addressing negative inflation by plugging leakages of liquidity from the economy.

More than $1,8 billion was externalised by individuals and corporates last year, draining the country of liquidity, according to statistics from the central bank.

“Circulating this liquidity within the national economy has a great multiplier effect and has a positive contribution to boosting aggregate demand,” Mangudya said.

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