Times Of Swaziland: DECREASE IN WINE, TOBACCO PRICES CONTRACTS INFLATION DECREASE IN WINE, TOBACCO PRICES CONTRACTS INFLATION ================================================================================ Mhlengi Magongo on 16/06/2022 08:07:00 MBABANE – The low prices recorded in tobacco and wines have resulted in a decrease of 10 bases points of the inflation rate. Inflation contracted by 10 bases point from four per cent to 3.9 per cent, as reported by the central statistical office, consumer price index (CPI) report.The report stated that the headline inflation in May 2022 for Eswatini and currently, is 3.9 per cent. “This annual rate is 0.1 per cent points lower than the corresponding annual rate of four per cent observed in April 2022,” outlines the report. The CPI report availed that alcohol beverages, tobacco and narcotics decreased to 2.6 per cent in April from one per cent in May 2022. Decrease It said the decrease was due to lower prices recorded in wine and tobacco sales resulting to a low index in this category.The lower headline inflation was due to decreasing annual rates of change, reflected in May on prices indices for furnishing, household equipment and routine household maintenance, which decreased by 120 bases points from 4.4 per cent in April to -1.2 per cent in May 2022. “Major household appliances and domestic services mainly resulted to the lower index in this category,” mentions the report. Other notable decreases that led to the contraction, include miscellaneous goods and services, which decreased from 3.2 per cent. The report said this was due to notable rates of price decreases in other appliances, articles and products for personal care, as well as other financial services resulted to a lower index, in this category. There are three main causes of high inflation: demand-pull inflation, cost-push inflation, and built-in inflation. Demand-pull inflation refers to situations where there are not enough products or services being produced to keep up with demand, causing their prices to increase. Cost-push inflation, on the other hand, occurs when the cost of producing products and services rise, forcing businesses to raise their prices. Lastly, built-in inflation occurs when workers demand higher wages to keep up with rising living costs. This in turn causes businesses to raise their prices in order to offset their rising wage costs, leading to a self-reinforcing loop of wage and price increases. Economist and consumer Consultant Sandile Vilakati said if inflation causes a nation’s currency to decline, this could benefit exporters by making their goods more affordable when priced in the currency of foreign nations “On the other hand, this could harm importers by making foreign made goods more expensive. Higher inflation can also encourage spending, as consumers will aim to purchase goods quickly before their prices rise further,” he said. Vilakati said savers, could see the real value of their savings erode, limiting their ability to spend or invest in the future. The Central Bank of Eswatini (CBE) announced that credit extended to the private sector has increased this month. This contributed to the contraction of the inflation as businesses were able to maximise money movement with the assistance of banks. Credit to private sector by central banks refers to financial resources provided to the private sector by other depository corporations, such as through loans, purchases of non-equity securities, and trade credits and other accounts receivable. CBE said the credit extended increased by 1.5 per cent month-on-month and 4.8 per cent year-on-year to E16.1 billion at the end of April 2022.This was mentioned by the Central Bank in the monthly statistical release. CBE mentions in the statement that the rise in credit to the private sector was credit to businesses and households & non-profit institutions serving households (NPISH), whilst credit to other sectors decreased. Increase They said the credit extended to businesses stood at E7.5 billion at the end of April 2022, reflecting an increase of 5.4 per cent over the month and 20.2 per cent relative to the previous year. “Contributing to the growth in credit to businesses were all its subsectors, namely; agriculture and forestry (17.7 per cent), manufacturing (8.9 per cent), community social & personal services (4.2 per cent), real estate (4.1 per cent), construction (3.5 per cent), transport and communications (1.1 per cent), distribution and tourism (0.8 per cent) as well as mining and quarrying (0.2 per cent),” mentions CBE. CBE said they raised the discount rate by 50 basis points to 4.5 per cent in May 2022.