Zim inflation down to 18,4% after adopting new calculation method

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By Alois Vinga

ANNUAL inflation rate has gone down significantly to 18,4% following the Zimbabwe National Statistics Agency’s (Zimstat) move to adopt an inflation calculation method which captures the dominance of the US$ in daily transactions.

Data released by the statistics agency Thursday shows that annual inflation increased by an average of 18,4% between September 2022 and September 2023 from the rate of 77,8% recorded last month.

The statistics organ revealed that going forward the arithmetic aggregation indices have been abandoned as a measure of calculating inflation.

“One such challenge is that the method follows the index with the higher magnitude, instead of the one with the higher weight. As a result, arithmetic aggregation was more inclined to the ZWL index, albeit accounting for 20 percent of the total weights,” said the agency.

Based on recommendations from the SADC Technical Review Mission on Price Indices held in July 2023, the geometric aggregation will now be employed.

“In view of the foregoing, ZIMSTAT adopted the geometric aggregation method in computing the weighted Consumer Price Index beginning September 2023. The migration to geometric aggregation has resulted in a decline of weighted inflation rates,” said the statistics organ.

The new stats are in line with official surveys confirming that the US$ now constitutes 80% of the transactions hence the need for basing inflation calculations on that reality.

Monthly inflation remains a bit stable after rising slightly by 1% during the period largely driven by food and non-alcoholic beverages.

The Food Poverty Line (FPL) in September 2023 rose by 3,9% to $73,235.85 from $70460,81 in August 2023.

The FPL represents the amount of money that an individual requires, to afford a daily minimum energy intake of 2 100 calories.

The Total Consumption Poverty Line (TCPL) for Zimbabwe was $95,462.53 per person in September 2023 representing an increase of 4, 8% when compared to the August 2023 figure of $91,063.30.

The TCPL is derived by adding the non-food consumption expenditures of poor households to the FPL.

Commenting on the latest trends, economist Persistence Gwanyanya attributed the surge to exchange rate depreciation experienced early this month but projected that annual inflation will not be impacted.

“The volatilities experienced early this month prompted the rise in inflation but considering the impact of the Monetary Policy Committee resolutions made this week we expect volatilities to ease off,” he said.