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Weak Aggregate Demand for Goods Fueling Deflation in Zimbabwe

Most industries are producing goods a lot of goods that are not getting into targeted markets.

The Zimbabwe Statistics Agency (Zimstat) says the country’s consumer prices fell by 2.47% in December last year.

Zimstat is quoted by the privately-owned Newsday newspaper as saying the prices slightly changed from the November rate of -2,46%.

According to the newspaper, the general price level remained the same as last year with year-on-year inflation opening 2015 at -1,3% and reaching -3,3 last October.

The year-on-year inflation rate (annual percentage change) for the month of November 2015 as measured by the all items Consumer Price Index stood at -2,46%, gaining 0,83% points on the October rate of -3,29%.

The deflation has been attributed to weak aggregate demand of local goods, the continued weakening of the South African rand against the United States dollar and other factors.

Economist Prosper Chitambara of the Labour and Economic Development Research Institute of Zimbabwe said the current situation does not do any good to local manufacturers as they are forced to compete with goods sourced from outside the country at cheaper prices.

Chitambara argued that the deflation reflects weak aggregate demand.