Stats SA’s chief director of price statistics, Patrick Kelly, said housing and utilities, miscellaneous goods and services, food and non-alcoholic beverages (NAB), and transport were the main drivers behind the headline rate in April. Photo: Ayanda Ndamane Independent Newspapers
The latest consumer price index (CPI) has confirmed fears that the South African Reserve Bank (SARB) will continue postponing further cutting interest rates, in spite of inflation falling for the second month in a row in April.
Data from Statistics SA (Stats SA) yesterday showed that headline inflation softened to 5.2% in April year-on-year, down from 5.3% in March and 5.6% in February, as general food inflation slowed except for vegetables, fruit and hot beverages.
However, inflation remained stubbornly high and well above the SARB’s preferred level of 4.5% of the 3–6% target range.
Stats SA’s chief director of price statistics, Patrick Kelly, said housing and utilities, miscellaneous goods and services, food and non-alcoholic beverages (NAB), and transport were the main drivers behind the headline rate in April.
“Annual inflation for food and NAB moderated further from 5.1% in March to 4.7% in April, representing a fifth consecutive month of decline. Most food and NAB sub-categories witnessed lower annual rates, except for vegetables, fruit and hot beverages,” Kelly said.
“Egg inflation recorded its fifth consecutive month of decline after peaking at 39.9% in November 2023, then receding to 25.1% in April 2024.
“On average, vegetable prices increased by 7.4% in the 12 months to April, higher than the 6.0% increase recorded in March. Vegetable products that recorded relatively high price increases include potatoes, frozen potato chips, broccoli and beans.”
According to Investec chief economist Annabel Bishop, international food prices are a key contributor to local food costs as South Africa is a price taker for most agricultural food produced through either import, or export, parity pricing.
“April saw international (US dollar) agricultural food commodities prices moderate by -0.2% month-on-month, adding downwards pressure to CPI food price inflation, along with the moderation in the rand,” Bishop said.
On a monthly basis, inflation rose by 0.3% in April following a 0.8% increase in March.
The core inflation rate, excluding volatile items such as food and NAB, fuels and energy, fell for the second month to 4.6% in April.
Economists yesterday said they did not expect much change to headline inflation in May.
Nedbank economist Johannes (Matimba) Khosa said they expected headline inflation to remain sticky at around 5.2% during the second quarter.
Khosa said the moderation in food prices will likely slow as the impact of last year’s favourable base fades, the rate of decline in global food prices slows, and the effect of drier weather conditions this summer starts to filter through the supply chain.
“Fuel prices will also exert mild upward pressure, with the unfolding geopolitical conflicts preventing a faster decline in global oil prices. The disinflation process will likely pick up pace around the fourth quarter,” Khosa said.
“Headline inflation is forecast to end the year at around 4.6%, averaging 5.1% over 2023 as a whole. However, there are still upside risks to our forecast.”
If consumer prices remain stubbornly high, the SARB will not taper its monetary policy until inflation is well contained within the midpoint of its target range.
The SARB has kept interest rates at a 14-year high of 8.25% since May 2023
FNB senior economist Koketso Mano said fuel inflation should lift again following the near 40 cents increase in petrol prices, but the fall in diesel prices means the total magnitude will be muted.
“Ultimately, headline inflation is expected to average above the 4.5% target this year. This means that monetary policy should remain unchanged for most of the year,” Mano said.
“This is further entrenched by expectations that Fed rate cuts will be shallower and later. We currently only see a potential 25 basis points cut at the SARB’s last meeting for the year.”
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