Inflation rate drops

“This means that prices, as measured by the all-items CPI, increased by an average of 3,94 percentage points between July 2011 and July 2012,” said the Zimbabwe National Statistics Agency (Zimstats) in a statement yesterday.
The rate of inflation denotes the magnitude by which prices of goods and services in-                     crease over a given period, usually a year or month.
A decrease in the rate of inflation does not necessarily mean or translate to a fall in prices by a similar measure or magnitude.
At 3,94 percent, the annual rate of inflation remains well within the confines of the 5 percent band below which Finance Minister Tendai Biti forecast inflation to close the year.
The year-on-year food and non-alcoholic beverages inflation, which is prone to transitory shocks, stood at 4,29 percent while non-food inflation stood at 3,79 percent in July.
Month-on-month inflation rate in July 2012 was 0,23 percent, gaining 0,03 percentage points on the June 2012 rate of 0,20 percent.
“This means prices as measured by the all-items CPI increased at an average of 0,23 percent from June 2012 to July 2012,” said Zimstats.
Tight liquidity, cash budgeting and low salaries give inflation very little latitude to move, but high cost of production due to old equipment (high utility charges, high cost of power and expensive finance) and a huge import bill continue to exert pressure on prices, hence determine inflation levels.
But Zimbabwe is facing a huge task to contain “imported inflation” which stems from its high import bill.
It has had to rely on imports as its own companies continue to struggle to recapitalise, bring in new equipment and improve efficiency to enhance competitiveness.
In the period January to May, Zimbabwe imported US$2,6 billion worth of merchandise and the figure is projected to rise to US$8,2 billion by December.
The scenario leaves Zimbabwe exposed to the vagaries of exchange rate movements, particularly the rand, the currency of its biggest trading partner, South Africa.
Zimbabwe imports more than 60 percent of its foodstuffs,as local companies and agriculture struggle to optimise production.