SA consumers feel the pinch of rising prices in October

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Consumers continue to buckle under the pressure of high prices as inflation rose by an average of 0.9% in October, according to data released by Statistics South Africa.

The annual consumer price inflation increased for the third consecutive month from 5,4% in September to 5,9% in October 2023. The main contributors to the rise in inflation came from food and non-alcoholic beverages, housing and utilities, transport as well as miscellaneous goods and services.

Food inflation rose from 8,1% in September to 8,8% in October, while transport inflation rose from 4,2% to 7,4% in the same period due to an increase in the fuel price.

The data shows that the prices of poultry-related products have come under increased upward pressure due to the outbreak of avian flu.

The price of potatoes also jumped significantly with the average price of a kilogram of potatoes increasing by nearly R9 compared to a year ago.

Senior Economist at Econometrix Laura Campbell says, “This outcome was greater than consensus forecasts.  It was mainly a function of fuel inflation and that’s purely statistically linked to the comparison against falling fuel prices a year ago. Unfortunately, we also saw the downward trend in food inflation, that’s been in place since April coming to an end in October as food inflation rose to 8,8%. This was a function of a rise in the inflation of milk, eggs, and cheese and that was due to the outbreak of the avian flu in the domestic economy which has led to a shortage of eggs.”

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A Chief Economist at Investec, Annabel Bishop, says while the rise in inflation may be a concern for the Reserve Bank, the bank is unlikely to hike interest rates when it makes its rate announcement on Thursday.

Inflation remains within the Reserve Bank’s 3 to 6% target range and is expected to moderate towards the midpoint in 2025.

“The key drivers were fuel, transport costs and food prices.  Looking forward, CPI inflation is not expected to see another large print next month as fuel prices fell in the month of November, which should provide some moderation in the CPI inflation outlook. However, the MPC meets tomorrow and of course, this elevated inflation figure will concern the Reserve Bank.  Its inflation forecasts are more elevated than those in the markets for 2024, so it should not necessarily change its outlook, but the South African Reserve Bank is likely to remain more hawkish, and while the risk of an interest rate hike remains for tomorrow, it is not widely expected.”

The Reserve Bank’s Monetary Policy Committee is expected to announce its decision on interest rates tomorrow at three o’clock.