The month of May saw the President of the United States softening his tariff stance against China, as the US reduced the initially imposed 145% tariff to the current 30% tariff. This is against the backdrop of a burgeoning trade war between China and the United States, which saw the Chinese retaliate by raising tariffs to 125%. The temporary truce led to more stability in stock markets, with the S&P 500 and Nasdaq Composite finishing the month with the biggest monthly gains since November 2023 of 6.2% and 9.6%, respectively.
Locally, according to ZimStat, Zimbabwe's weighted dollar monthly inflation rate took a downturn in May after dropping by 0.3 percentage points to 0.0%, reflecting stability across both local and foreign prices. The US dollar (USD) month- on-month inflation rate fell to -0.3% in May, shedding 0.5 percentage points on the April rate of 0.2%. The food and non-alcoholic beverages category saw a US dollar month-on-month inflation rate of -0.9% in May, shedding 0.9 percentage points on the April rate of 0.0%. May USD month-on-month non-food inflation rate was 0.0%, shedding 0.3 percentage points on the April rate of 0.3%. On the other hand, the Zimbabwe Gold (ZIG) month-on-month inflation rate was 0.9% in May, gaining 0.3 percentage points on the April rate of 0.6%. Moreover, the ZIG month-on-month food and non-alcoholic beverages category inflation rate was 1.6% in May, gaining 1.8 percentage points on the April rate of - 0.2% while the May ZiG month-on-month non-food inflation rate was 0.6%, shedding 0.5 percentage points on the April rate of 1.1%. The likely outlook for inflation remains fluid. Notably, the Zimbabwean government increased the strategic fuel reserve levy in a bid to stabilize fuel supply and shield the country from global market fluctuations under Statutory Instrument 50 of 2025 (SI 50 of 2025), which went into effect on the 9th of May 2025. This marks a 28.34% increase for the petrol levy and 19.1% for the diesel levy compared to the previous year which is likely to increase costs of doing
business by inducing some inflation.
The two bourses moved in the opposite direction of the previous month, with the VEX's market capitalization retreating by 5.93% and the All-Share index softening by 6.48% while the ZSE market capitalisation gained 2.69% and the top ten index rose by 2.33%. Econet recorded a significant block trade at the end of the month where 97.68mn shares were exchanged, boosting overall traded volumes. As tight monetary conditions in ZIG flows persist, the ZSE is likely to remain flat, notwithstanding any structured trades that are likely to distort volumes while the new and proposed listings on the VFEX are likely to increase trades on that.
