CPIX: Still falling, but food prices soar

2009-01-28 00:00

ALTHOUGH South Africans will almost certainly receive an interest rate cut next Thursday on the back of the latest overall consumer inflation data, this will provide little solace to locals as food inflation continues to skyrocket.

The latest consumer inflation data released yesterday revealed that CPIX — inflation excluding interest rates on mortgage bonds — slowed significantly in December 2008, coming in at 10,3% year on year (12,1% in November 2008).

The Reserve Bank’s monetary policy committee, which will meet next Wednesday and Thursday, will take into serious account the latest CPIX figure, which is the lowest reading in nine months.

Some economists have even predicted a 100-basis-point rate cut.

However, local consumers will find little solace in this news. Pietermaritzburg’s food inflation soared to 18,3% year on year.

Food inflation in Durban was 17,3% in December 2008. National food inflation accelerated to 17,1% year on year in December in South Africa.

Chief economist at Dynamic Wealth, Professor Chris Harmse, said coffee, tea and cocoa products registered an increase of more than 20% year on year in December 2008.

Efficient Group’s Fanie Joubert said, “Grain products [up 34,3% year on year] recorded the strongest rise, followed by fats and oils [up 27,3%], milk and cheese [16,2%], vegetables [13,4%], and meat [8,4%]. The biggest price pressure remains at the processing step, as processed foods climbed 20,7%, compared to a rise of 13% in unprocessed food items.”

Although the upsurge in the prices of milk and cheese remains puzzling after prices of dairy products have fallen in recent months, the overall food inflation picture is clear.

Said Standard Bank economist Danelee van Dyk, “Food price inflation may take time before it abates by a significant margin. Relief from the farm gate has been filtering through to manufactured prices unhurriedly, owing to suppressed margins. And any further relief owing to lower oil prices may be slow to trickle down in a weak rand environment.”

She added: “Encouragingly, the murmurs made by major food retailers to construct an investigation into high food prices may turn into a good inflation story for 2009.”

Economists said declining fuel prices have begun to have an impact on overall consumer inflation.

South Africa’s CPI or headline inflation in December 2008 was 9,5% year on year while Pietermaritzburg’s CPI was 10,7% (Durban 10,2% and KZN 10,4%).

kavith@witness.co.za

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