February 2022 inflation data for Zimbabwe provide some cause for concern in an economic situation that is already precariously poised. Year on year inflation came in higher at 66.1% compared to 60.61 in the previous month. This confirms the continued upward trajectory we have noticed since August 2021. Meanwhile, month on month inflation came in at 7%, the highest it been in 18 months and well above targets required to achieve the goals of the Ministry of Finance and the Reserve Bank of Zimbabwe.

Year on Year


66.1% is certainly much lower than recent inflation highs for the year on year picture. The troubling part is not how high inflation is but that it is trending upwards since reaching 50.24% in August 2021. Since that decline ZimStat inflation figures have registered one other decline, a marginal decline between December and January. Other than that anomaly year on year inflation has been increasing at an increasing rate. This would be a big cause for concern as we have been here before. The table below clearly shows the trend with the month change in the 3rd column. Not quite the start to the year that authorities would’ve hoped for.

Month

Y-o-Y %

% Change

Jul

56.37%

N/A

Aug

50.24%

-6.13%

Sep

51.55%

1.31%

Oct

54.50%

2.95%

Nov

58.40%

3.90%

Dec

60.70%

2.30%

Jan

60.61%

-0.09%

Feb

66.10%

5.49%

Month on Month

The month on month inflation statistics offers no respite to Zimbabweans. February 2022 month on month inflation was reported at 7%. This is the highest it has been in 18 months and is a sign that what we are witnessing with the year on year inflation is reflective of things on the ground. The parallel market rate surge in the late months of 2021 would certainly have contributed to the price hikes we have seen in the early part of 2022. Monetary policy statements continue to show contractionary intentions but with fiscal policy at odds showing expansionary intent something has to give and it is inflation in this case.

With an interesting trend of price hikes in late February in many sectors, the picture does not look good for the coming months. The Reserve Bank of Zimbabwe, through the foreign currency auction, has ceded some ground and devalued the Zimbabwean dollar on the official market while the parallel market seems to have found some equilibrium. The question is whether pricing is catching up to the parallel market rate or businesses are forward pricing for what they expect to come?