The ZimStat reported month on month inflation continues to show a downward trend after the release of the inflation figures for December 2019. 16.55% for the month of December Mark’s another decline from 17.5% the previous month. Meanwhile, the implied year on year inflation measure broke into the 500s. 521.2% is a mother record high as the annual inflation measure continues to push higher and higher.
Food and non-alcoholic beverages inflation was reported at 15.75%, a 6.88 percentage points reduction from the previous month. No food inflation increased by 3.2 percentage points on the previous month to 17.14%. Zimstat inflation figures have long been questioned and the latest release does nothing to dispel the distrust in the reported inflation figures. The data was collected between 12 and 18th December according to Zimstat.
In spite of the government of Zimbabwe’s reluctance to publish annual inflation figures, the implied annual inflation figure of 521.2% shows no abatement in price increases but points to the month on month reduction in inflation as a mere slowing of the rate of increase as opposed to a reduction in prices. The average month on month inflation for 2019 was 17% compared to only 3.2% in 2018.
After forecasts and promises of dropping inflation failed to materialise in 2019 the decision to stay silent on the year on year inflation has its motives revealed. It is a much more palatable to report on slowing month on month inflation than the raging year on year inflation. The key to pricing is, of course, exchange rate movement and as we have observed many times that is directly linked to money supply growth. Reserve Bank of Zimbabwe officials have admitted as much.
With the government on a mission to end the cash crisis by injecting cash into the system, another 500 million worth of Zimbabwean dollars will be introduced into the market in the first 6 months of the year 2020. While the government argues that introducing all 1.1 billion worth immediately would be inflationary the logic doesn’t add up. According to them the cash notes are being swapped for bank balances therefore not increasing the money supply at any point in time.
While ZimStat continues to report ever-decreasing month on month on inflation the Zimbabwean situation continues to deteriorate. The reporting of year on year inflation is said to resume in February, we shall see if that indeed is the case.