Food prices push up in­fla­tion

CPI at 5.4 per­cent in May

The Star Early Edition - - BUSINESS REPORT - Ka­belo Khu­malo

SOUTH Africa’s head­line Con­sumer Price In­dex (CPI) ticked up 0.1 per­cent year-on-year in May to 5.4 per­cent, driven largely by faster food in­fla­tion, ac­cord­ing to fig­ures re­leased by Sta­tis­tics SA.

Food in­fla­tion in­creased 0.6 per­cent to 7 per­cent. How­ever, core in­fla­tion, which ex­cludes food, non-al­co­holic bev­er­ages, petrol and en­ergy, was steady at 4.8 per­cent in May.

John Ash­bourne, the Africa econ­o­mist at Cap­i­tal Eco­nom­ics, said it was im­por­tant that in­fla­tion re­mained within the South Africa Re­serve Bank’s tar­get range of 6 per­cent.

“We do not ex­pect that this brief in­crease in head­line in­fla­tion will be sus­tained. An im­proved har­vest should re­duce food price in­fla­tion over the du­ra­tion of this year.

“The in­fla­tion­ary ef­fect of fuel prices will also prob­a­bly fade. Con­sumer petrol prices ac­tu­ally dropped by 25c a litre be­tween May and June,” Ash­bourne said.

Macro-eco­nom­ics sta­tis­tics web­site Trad­ing Eco­nom­ics said the core in­fla­tion rate in South Africa av­er­aged 5.17 per­cent from 2009 to 2017, reach­ing a high of 8.3 per­cent in May 2009 and a record low of 2.9 per­cent in Jan­uary 2011.

The main con­trib­u­tor to the uptick in food in­fla­tion was meat prices, which rose 1.3 per­cent in May, but 12.3 per­cent an­nu­ally, the high­est meat price in­fla­tion rate in five years.


Only four cat­e­gories in the food sec­tor recorded price de­clines: bread and ce­re­als, fish, and fruit and veg­eta­bles. The price of oils and fats re­mained un­changed.

Wandile Sihlobo, the agri­cul­tural econ­o­mist at the Agri­cul­tural Busi­ness Cham­ber, said it was not sur­pris­ing that meat prices had in­creased, be­cause farm­ers were re­stock­ing their herds fol­low­ing the drought.

Sihlobo said farm­ers had slaugh­tered 193 373 head of cat­tle in April, down 19 per­cent from the pre­vi­ous month.

As farm­ers con­tin­ued to re­stock their herds, slaugh­ter­ing eased slightly, re­sult­ing in an in­crease in meat prices.

How­ever, the ex­pected re­cov­ery in the poul­try sec­tor could soften the rate of in­crease in meat in­fla­tion over the com­ing months, Sihlobo said.

On an an­nual ba­sis, the in­crease in in­fla­tion stemmed mainly from hous­ing and util­i­ties, which rose 1.4 per­cent in May, but 5.7 per­cent year-onyear.

Food and non-al­co­holic bev­er­age in­fla­tion in­creased 1.2 per­cent monthly and 6.9 per­cent an­nu­ally.

The in­fla­tion rate for mis­cel­la­neous goods and ser­vices in­creased 1.1 per­cent in May and 7.3 per­cent year-on-year.

San­isha Packirisamy, an econ­o­mist at MMI In­vest­ments, said al­though core in­fla­tion was ex­pected to re­main be­low 5 per­cent in the com­ing months, the lower rate of cur­rency passthrough ob­served re­cently sug­gested that in­fla­tion might not ex­pe­ri­ence the full ben­e­fit of pre­vi­ous rand strength.

“We are of the view that a favourable real in­ter­est rate out­look pro­vides a limited op­por­tu­nity to cut in­ter­est rates by 50 ba­sis points, cu­mu­la­tively, in the first half of 2018.

“How­ever, should the rand de­pre­ci­ate more ma­te­ri­ally rel­a­tive to our fore­casts … on a sus­tained ba­sis, such that it im­pacts in­fla­tion ex­pec­ta­tions neg­a­tively, the scope to cut in­ter­est rates from cur­rent lev­els would be sig­nif­i­cantly re­duced,” Packirisamy said.

The Re­serve Bank has been re­luc­tant to cut its main repo rate from the cur­rent 7 per­cent, say­ing it first wanted to see a sus­tained de­cline in the in­fla­tion rate.


Bat­tery chick­ens in a poul­try farm in Cape Town. The ex­pected re­cov­ery in the poul­try sec­tor could soften the rate of in­crease in meat in­fla­tion over the com­ing months.

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