The 6pc drop in inflation rate real-ZIPAR

THE recent 6.4 percent drop in the annual inflation rate for the month of October 2016 is genuine as it has been triggered by the slow speed for prices of basic needs as compared to the same period last year, says Zambia Institute for Policy Analysis and Research (ZIPAR).

The institution has however said prices of goods on the market were still high, but at a slow speed.

ZIPAR research fellow Shebo Nalishebo explained that the Central Statistical Office (CSO) collected 440 products in all districts for the food basket called Consumer Price Index (CPI) during the first 10 days of a month which was used to measure the annual inflation rate.

Mr Nalishebo said the CPI used to measure prices of goods and services on the market for October 2016 indicated that the speed at which these services were increasing, was slow.

“The CSO uses the different 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.

Mr Nalishebo said products in the food basket allowed the CSO to come up with an average price which was later indexed to come up with the annual inflation rate.

He however said the drop in the inflation rate did not mean that the cost of food basket had reduced.

He said between October 2015 and October 2016, the central bank took remedial action to combat the rapid increase in inflation which meant that the cost of the basket continued to rise, but at a slower rate.

“While individual prices of products or services may have gone up or reduced, the cost of the basket of goods and services, from which inflation is calculated, has continued to rise.

“In other words, the inflation rate has fallen, but prices are still high,” he said.

Mr Nalishebo further explained that the recent fuel hike which took place on 14^th of October was not captured in the inflation rate for the same month as it happened after the CSO had already collected the prices for the basket, which was in the first 10 days on each month.

He said the weight of transport where fuel increase had an immediate effect was minimal of 5.8 percent, with little effect on the CPI.

He said the fuel price was likely to increase the November month-on-month inflation rate beyond 0.5 percent.

CSO recently announced that the annual inflation rate for October 2016 had dropped to 12.5 percent from 18.9 percent recorded in September.