Food inflation ‘may have peaked’
The cost of a traditional South African braai increased moderately in January after a sharp drop the prior month, confirming the South African Reserve Bank’s (Sarb) forecasts that beleaguered consumers may continue to see elevated food prices ease.
Bloomberg’s Shisa Nyama Index shows the average price rise of a backyard braai was 6.2% this month on an annual basis, the same as December but significantly less than the 10% recorded in November.
That compares with 8.5% yearon-year increase in food prices in December, as measured by Statistics South Africa. The Sarb forecasts food inflation to average 5.7% this year,
Onions, cooking oil and samp were the biggest contributors to the index remaining steady as they eased.
The gauge, crunching data from the Pietermaritzburg Economic Justice and Dignity (PMBEJD) group, tracks the prices of 14 key ingredients in braais consumed in South African townships.
To compile its survey, the PMBEJD’s data collectors track food prices on the shelves of 47 supermarkets and 32 butcheries that target the low-income market in the greater areas of Johannesburg, Durban, Cape Town, Pietermaritzburg and Springbok.
Sticky food prices have been a key driver of overall inflation and have contributed to the Sarb’s monetary policy committee (MPC) retaining interest rates at a 2009 high of 8.25% since July.
After the MPC’s 25 January meeting, governor Lesetja Kganyago said while inflation eased during the latter part of last year, it needs to trend lower to the midpoint of the reserve bank’s 3% to 6% target band, where it prefers to anchor expectations.
“There isn’t a discernible trend that shows that inflation is declining towards our target,” he said.
“For as long as there isn’t any sustained decline of inflation towards our target, and more importantly that inflation stays there in a sustained manner, don’t expect us to recalibrate policy.”
Better-than-expected rainfall in SA at the end of last year and this month may mean that an anticipated drought has been averted and could help to keep food inflation in check. –