Zambia’s headline inflation rate jumped to 19.5% y/y in November, up from 14.3% in September and 7.7% in August as well as from 3% only two years ago.
The acceleration was driven by both food and non-food items. Food inflation increased from 16.2% y/y to 23.4%. This is probably due to a combination of drought and rising production costs. Meanwhile, non-food inflation was up to 15.5% y/y, from 12.4%. The drivers were transport (+24.4% y/y), health (+18.8% y/y) and clothing (+18.8% y/y).
First National Bank (FNB) believes that the massive Kwacha weakness this year is starting to feed into the cost of imported goods, which is driving up non-food inflation. The kwacha is the worst performing currency in the world this year, losing almost half of its value against the US Dollar. FNB remains concerned about the inflation outlook due to electricity supply shortages (which reduce production and drive up costs), further exchange rate pass through, and the possibility of additional administered cost increases.