The cost of living increased by an average of -0,1 percent in May gaining 0,1 percent from last month’s figure of -1,1 percent, according to data released by the Central Statistical Office yesterday.

This is the first time for the inflation figures to increase for the past four months, when the inflation rate was pegged in foreign currency denominated figures.

This is because the South African rand rate gained more than the American dollar.

The month-on-month food and non-alcoholic beverages inflation stood at -0,84 percent gaining 2,07 percentage points on April’s rate of -2,91.

Month-on-month non-food inflation stood at -1,05 percent, gaining 0,07 percentage points on the April rate of -0,22 percent.

Between the end of March and the end of April, the cost of living as calculated by the Central Statistical Office fell by 1, 1 percent — less than the record 3,0 percent seen in March, but enough to mean the cost of living fell by just over 9,2 percent in the first quarter of the year.

Deflation means if prices continue falling as they did in the first quarter, prices will be almost 29 percent lower at the end of this year than they were at the end of last year.

Inflation in minus figures is often called deflation.

Deflation was seen in the past four months.

Last month’s drop in the cost of living of 1,1 percent follows a 3 percent, 2,3 percent fall in January and a 3,1 percent dip in February, the CSO has reported.

Zimbabweans have seen prices fall since the Government allowed manufacturers, suppliers and retailers to price goods and services in hard currency.

The fall in prices for the first quarter of the year was due to two factors: first and foremost, the stiff competition in the market that has arisen — forcing all suppliers of goods and services to refine their distribution chains and see where they can cut margins.

The steadily rising output from Zimbabwean manufacturers, plus improved productivity and growing economies of scale across all sectors as the economy expands again, have made such decline in margins possible while still retaining profitability and viability.

Secondly, there is low level of money supply.

Zimbabwe is seeing the classic cause of deflation that of little money chasing too many goods.

Money supply can only grow as the economy grows, and higher output is likely to result in greater productivity, so the deflationary pressure is likely to continue for a while.

Economists predict inflation rates will remain negative due to increased competition.

(Source)