Zimbabweans received February inflation news with a bit of pomp and fanfare. Year-on-year inflation plummeted from 229.8% in January to just 92.3% in February. Meanwhile, month-on-month inflation dropped below zero. Coming in at -1.6. We last saw negative inflation figures back in 2018. As the saying goes, if something is too good to be true it probably is. Such is the case with our inflation figures as they are a result of the change in measurement method rather than the change in prices.
Blended inflation
Blended inflation was introduced to cater to the fact that not all transactions in the economy happen in Zimbabwean dollars. Using the Zimbabwean dollar as a unit of account means when we look at prices they continue to rise as the Zimbabwean dollar devalues. However blended inflation is a rather complicated concept for the user. Sure, 70% percent of transactions in the economy occur in US dollars but 70% of individual users’ transactions will likely not be the same. That percentage changes from user to user and blended inflation fails to account for that. Blended inflation has been reported for close to two years now but it has never been the focus for the reasons stated above.
Due to its flattering depiction of the inflation picture it has been chosen as the official inflation rate for reporting. So what ZimStat reported for February was blended inflation, though in January we had Zimbabwean dollar inflation. So we cannot compare the historical headline official data with this month’s headline data.
What we can do for perspective is to look at January blended inflation figures. January’s year-on-year blended inflation was 101.5% compared to February’s 92.3%. So we are continuing the downward inflation trend. Month-on-month blended inflation for January was 0.7%. The same was 1.3% in December 2022. Again the confirmation of a continued downward trend.
It’s unfortunate that we have lost comparability of our inflation data with data from the past. In time we will have enough of a track record to look back on and garner sufficient information. The move has so far been met with a hostile reception from many corners as it makes planning difficult.
All along ZimStat published both Zimbabwean dollar inflation and Blended CPI inflation. The latest change not only makes Blended inflation our headline inflation but eliminates the reporting of Zimbabwean dollar inflation. This is the point of contention for many critics. If they continued to report Zimbabwean dollar inflation we would have comparability and continuity.
