Official, ‘real’ inflation mismatch widening

Official, ‘real’ inflation mismatch widening

REAL INFLATION

THERE is a growing mismatch between “real” and official inflation figures, an economist has observed.
Speaking at the Confederation of Zimbabwe Industries 2018 economic symposium last week, BancABC chief economist James Wade said there was a chasm between the inflation rate being announced by the Zimbabwe National Statistics Agency (ZIMSTAT) and the rate at which prices of goods and services were going up, eroding disposable incomes.
Zimbabwe’s inflation rose to 3,46 percent in December last year after gaining 0,49 percentage points from the November figure of 2,97 percent. Month on month, the inflation rate fell to 0,53 percent from 0,74 percent in November.
Some economists, however, believe the figure was much higher.
“You tend to wonder if the 3,46 percent is the real inflation… There is a mismatch between what the consumers are facing in terms of the prices of products and what is reported by ZIMSTAT. Clearly, the inflation figures do not reflect the price increases we are witnessing in this economy. Prices of some goods are now as high as four-times regional parity prices and disposable incomes continue to be eroded,” said Wade.
Local financial research firm, Equity Axis recently also said inflation had spiked by a huge margin.
“Rising inflation has implications on wage pressures and interest rates. In our case it is already showing. The mismatch is showing,” said Wade.
In December ZIMSTAT defended official inflation data following criticism that its figures seemed to understate price increases experienced during the last quarter of 2017. In a statement accompanying the December inflation report, ZIMSTAT said it compiles the statistics using the same international guidelines and manuals that the other national statistical offices use.
“In compiling the Consumer Price Index, ZIMSTAT, like all other national statistical offices, uses the United Nations Statistical Commission’s guidelines and manuals,” ZIMSTAT said.
The agency also dismissed assertions by American economist Steve Hanke that Zimbabwe, which registered 500 billion percent inflation in December 2008, has slipped back into hyperinflation.
“Technically, hyperinflation is defined as a situation where prices increase so fast that the rate of inflation is 50 percent or more per month. The rate of inflation in Zimbabwe is currently below 10 percent meaning that Zimbabwe is not in hyperinflation,” ZIMSTAT stated.
In December last year, Reserve Bank of Zimbabwe governor, John Mangudya said the inflation level in the country was stable, describing it as “acceptable”.
Mangudya said the country’s inflation rate was stable and blamed companies and individuals who were raising prices of goods and services each time there was an artificial shortage resulting in panic buying among Zimbabweans.
He said the “unjustified price increases” were making current inflation levels appear to be artificial to some sections of society including a handful of business people.

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