SA’s CPI accelerates to 7% and food inflation hits a 14-year high Ed Stoddard

South Africa’s consumer price index (CPI) accelerated on an annual basis to 7.0% in February, from 6.9% in January, Stats SA said on 22 March. This exceeded market expections of 6.8%.

Consumer inflation had been moderating since October, a positive trend amid the wider economic gloom. Food prices were the main driver of the February reversal, signalling a worsening in the cost-of-living crisis that is exacting its harshest toll on poor and working-class households.

“Prices for food and nonalcoholic beverages increased by 13.6% over the past 12 months, up from 13.4% recorded in January. The reading in February is the highest since April 2009 when it was also 13.6%.

“Annual inflation for bread and cereals was 20.5%, slightly lower than January’s 21.8%,” Stats SA said.

Stripping out nonalcoholic beverages, food inflation in the year to February picked up to 14.0% from 13.8% in January. And the price of maize meal, a key staple, is becoming unaffordable for many households.

“Its price index increased by 2.2% between

January and February, taking the annual rate to 34.7%,” Stats SA said.

Meat inflation remains on the boil, rising to 11.4% in the year to February, from 11.2% in January. The escalating price of chicken and other meat products is largely a result of the disruptions to slaughter chains and cold storage systems triggered by blackouts.

“High input costs for agriculture still place a drag on the sector, including the heady cost of inputs such as fertilisers, etc, while self-generation electricity costs to meet the impact of load shedding are an additional factor, as is loss and wastage on severe load shedding at the ports for agricultural products requiring refrigeration or freezing. Irrigation also relies on electricity,” said Investec chief economist Annabel Bishop in a note on the data.

SA food inflation is also defying international trends, which further highlights the role of power shortages. The Food Price Index compiled by the Food and Agriculture Organization of the United Nations declined in February for the 11th consecutive month.

This is all deeply concerning. Quickening inflation is unfolding in an economy that may be in recession after contracting 1.3% in the fourth quarter of last year because of the surge in rolling blackouts, and is burdened with an unemployment rate of 32.7%.

This raises the spectre of stagflation – low growth or a contracting economy beset by high unemployment and inflation.

Climbing food prices are also a potential spark for social unrest.