Golden Sibanda Senior Business Reporter
THE annual inflation of rate trended downwards for the second consecutive month after shedding 0,06 percentage points in August to 0,09 percent in September 2014 due to what economist believe is mere disinflation.According to the Zimbabwe National Statistical Agency, the inflation figures imply that the price of goods and services declined by an average of 0,09 percent in the period between September 2013 and September 2014.
The International Monetary Fund projected inflation to end this year low, around 0,2 percent rising to 1,2 percent in 2015, a starkly different scenario to the era of hyperinflation when the rate peaked at 231 percent.
Year on year food and non-alcoholic beverages inflation, prone to transitory shocks, stood at minus 2,95 percent while non-food inflation was 1,59 percent. Month on month inflation came in at minus 0,01 percent, after gaining 0,30 percentage points on the August rate.
Month on month food and non-alcoholic beverages inflation stood at minus 0,34 percent in September, gaining 0,35 percentage points on August.
Monthly non-food inflation gained 0,22 percentage points to minus 0,07 percent, in growing reflection of the tight liquidity situation in the economy. Market developments reflect dynamics of the free market economy where fiscal measures have little effect on what is happening.
University of Zimbabwe lecturer Professor Tony Hawkins said that the southward inflation trend was unlikely to track its previous path that saw the rate falling below zero, sparking conflicting theories around the issue of deflation.
Deflation, is usually not desirable, as it signifies falling consumer demand, which businesses may seek to discount through price cuts, compromising profitability and in instances necessitating massive job cuts.
Zimbabwe slipped into deflation in February when annual inflation shed 0,90 percentage points to minus 0,49 percent from the January statistics.
The annual rate of inflation for July rose to 0,31 percent from minus0,08 percent in June, as the country exited deflation, which different schools of thought attributed to either price correction or falling demand.
“No I do not think (that Zimbabwe is heading back to below zero inflation). I think this is due to falling rand and strengthening dollar,” he said. Prof. Hawkins said the dollar may keep going, with the rand stabilising.
He said this has reflected in trade figures, where imports have fallen substantially, especially with respects to products where Treasury raised duty. In such a flat economy, he said “we should not be surprised”.
Prof Hawkins said that the rand has been on a free fall for a long time and it was time that it should start to stabilise, but confidence in the major economies has given the greenback impetus in last few months.
As such, he contends that falling inflation pointed to a direction reflecting a lot differentials caused by currency movements. Zimbabwe uses a basket of major currencies dominated by the US dollar.
Prof Hawkins said that the prevailing inflation rate trends were also largely reflective of flat and sluggish economic activity in Zimbabwe, characterized by tight liquidity and low industrial productivity and diminishing demand.