October inflation rate drops

October inflation rate drops
By Chiwoyu Sinyangwe
Fri 28 Oct. 2011, 09:20 CAT

THE country's consumer inflation slowed to 8.7 per cent year-on-year in October from 8.8 per cent in September, says the Central Statistical Office. CSO said the decrease in inflation rate was attributed to a reduction in some food and non-food items. The country had targeted year-end inflation rate of 7.0 per cent.

"The annual inflation rate of inflation, as measured by the all items Consumer Price Index (CPI), reduced slightly to 8.7 per cent in October 2011 from 8.8 per cent in September 2011," said CSO acting director John Kalumbi. "The effect of the current fuel price reduction will be reflected in the November Consumer Price Index."

And economic commentator Chibamba Kanyama doubted the country's
ability to meet the targeted annual inflation rate of seven per cent
by year end.

Kanyama, immediate past national secretary of the Economic Association
of Zambia (EAZ), however said the country would achieve a single-digit
inflation rate by December.
"The country will certainly not attain the seven per cent projected
drop in inflation," Kanyama said in an interview.

Kanyama said the recently announced reduction of fuel price of about
K400 would most likely lead to reduced inflation by 0.3 per cent
points as some sections of the business value chain had not
transferred the benefit to consumers.

"However, the benefit of the reduction in fuel price will be
translated in companies not arbitrarily increase the cost of goods and
services in coming few months given that the fuel is a significant
cost driver in the production process," Kanyama said. "The inflation
rate is also dependant on the food prices towards the end of the year.
Traditionally, the post-harvest period slows down inflation, but only
temporarily."

He said the key determinant on the impact of food on inflation was the
performance of the Food Reserve Agency.
"As at now, much of the food is yet to be collected from rural depots
and this has signaled high levels of uncertainty on food stocks going
forward," said Kanyama.

"However, given that there have been some
administrative and operational re-alignments in the organisation, food
prices will not have a huge negative impact on the general price level
as we conclude the year. Prices will not reduce but will rather stay
the same and this implies the inflation rate will not be driven down
to lower levels."