SA inflation eases slightly to 5.7%

South Africa’s headline inflation for January eased to 5.7% from 5.9% in December – which Statistics South Africa (Stats SA) says was mainly due to lower fuel prices – while food, transport and energy costs remain the key upward drivers.

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Between January and December, the consumer price index (CPI) increased by 0.2%, this is compared with December’s monthly rate of 0.6%.

Where consumers felt reprieve

According to Stats SA, motorists, businesses and passengers using public transport saw a small reprieve in January.

Fuel prices dropped 2.8% in January versus December and the annual price increase registered 32.2% in January, (December: 40.5%).

Further, a seasonal look at public transport costs between December and January indicate that consumers saw a decrease in car rental prices (down 12%), air fares (down 11.3%) and long-distance buses (down 20.7%).

However, an annual assessment shows that when compared with January 2021, car rental (up 53%) and air fare (up 13.5%) prices increased, while long-distance bus fares decreased by 9.3%.

Where consumers felt the pinch

On the other hand, in January consumers felt the pinch when it came to food and non-alcoholic beverage prices, with inflation for January registered at 5.7%, up from December’s 5.5%, recording a monthly rate of 0.9% that was driven up by increases in cooking oil and vegetables prices.

According to Stats SA, cooking oil prices reached 11-year highs, increasing by 5.2% between December and January, leaving the annual rate at 32.2%.

“The average price of a bottle of cooking oil (750 ml) increased to R31.12 in January 2022 from R24.25 a year ago,” Stats SA says.

“The annual rate for oils & fats was 22.9% in January, the highest reading since 23.7% in September 2011 (almost 11 years ago),” Stats SA adds.

Vegetable prices also saw a jump in January of 3.4%. With the annual rate reaching its highest level since April 2019, coming in at 8.6% in January.

Tomatoes (17.4%), lettuce (15.3%), spinach (6.9%), carrots (5.7%) and pumpkin (2.6%) were the vegetable products that saw the most notable increases.

Latest inflation numbers expected

Wealth and asset management business Anchor Capital says that although there is some concern around fuel and food inflation, the latest figures remain within expectations.

“Although we remain concerned about upside risk to food and fuel inflation in 1H22, there should be strong favourable base effects in 2H22 (second half of 2022). Core inflation is, however, expected to continue drifting higher as the economic recovery continues,” Anchor Capital comments.

“Overall, the rise in SA inflation has thus far lagged the global escalation, which can largely be attributed to SA’s weaker economic recovery as well as the relatively resilient rand exchange rate, which has been benefitting more than peers from terms-of-trade gains,” it adds.

Anchor Capital further noted that the country’s inflation should stay contained for the rest of the year, adding that should the South African Reserve Bank (Sarb) choose to hike rates, this will be driven by global pressures as opposed to local factors.

“It is important to remember that SA’s real policy interest rate remains somewhat low vs its peers, notwithstanding many advanced economies still having negative real rates.”

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“This is typically not a swing factor in the Sarb’s decisions but may further justify front-loading the, relatively gradual, rate hikes that we foresee,” Anchor Capital notes.