Inflation eases slightly

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Food and fuel prices continue to drive the consumer price inflation Photo: Sthembiso Lebuso
Food and fuel prices continue to drive the consumer price inflation Photo: Sthembiso Lebuso


Food and fuel prices continue to drive consumer price inflation (CPI), which tapered down to 7.6% in August 2022 from 7.8% in July 2022.

Transport costs were up over 21% year-on-year in August, contributing nearly 0.3% to the headline inflation number.

On a month-on-month basis, the fuel price was down 0.1%. 

While food and non-alcoholic beverages were up 11.5% year-on-year, contributing 1.9 percentage points to the overall number.

Prices for housing utilities, such as electricity and municipal rates, were also up, adding 1.0 percentage points to the CPI number on the back of annual increases for administered prices in July. Electricity prices went up by around 7% in most municipalities, with Eskom now looking for a 30% increase for next year. 

Economists expect headline inflation to start moderating and follow global trends with global inflation now on a downward trajectory. Core inflation, which excludes food and fuel prices, slowed to 4.4% year-on-year in August from July’s 4.6%. 

However, moderating inflation doesn’t mean consumers will dodge another interest rate hike expected to be announced on Thursday when the Reserve Bank’s monetary policy committee (MPC) concludes its meeting to decide on rates.Investec’s Annabel Bishop said:

The Reserve Bank was still expected to hike interest rates by 75 basis points tomorrow, as the US Federal Reserve does the same tonight, with one month’s dip in some inflation pressures unlikely for either central bank to call an end to their upwards interest rate hiking cycles yet.

Independent economist Elize Kruger said: “I am hoping for a 50 basis point in light of the fact that inflation turned in July and will be moderating from here onwards towards 6.5% by December and also given the significant impact of load shedding on the economy. I think our economic growth numbers are going to be dismal this year. In light of this, I am hoping they will opt for a 50 basis point hike instead of the market consensus of 75 basis points.”

CPI breached the reserve bank’s upper limit of 6% in May and is expected to remain elevated in the short term to only moderate within the midpoint of the target band in the next year or so. Kruger said consumers will continue to feel the impact of inflation in their pockets. This will be worsened by increasing interest rates, which will increase the cost of debt while decreasing consumers’ disposable incomes. She said food prices remained elevated more than expected in August, adding:

Food prices were higher than expected and have offset the positive impact of the R2 per litre drop in the fuel price, so consumers didn’t really feel the impact of the fuel price drop.

"Fuel prices are expected to drop again in October. We’re expecting a drop of just over R1 per litre for petrol and a small increase of about 20 cents for the diesel price. This will help to moderate the extent of the rate of increase of the CPI. I do believe that the July [CPI] number of 7.8% was the upper turning point of our current headline inflation cycle.” Bishop added that the rise in international food prices was a key contributor to the surge in local food inflation.

She said: “South Africa is a price taker for most agricultural food produced through either import or export, parity pricing. The month-on-month lift was 3.7%, while a rise of 14.2% year-on-year occurred (economist food price index), supportive of elevated annual inflation.

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Indeed, food prices exerted the only contribution increase on the month to the overall CPI, up 0.3% month-on-month or 11.5% year-on-year from 10.1% in July.”  

The current bout of load shedding is expected to hamper economic recovery in the third quarter and possibly annual growth for 2022. Kruger had pencilled a 0.5% growth uptick for the third quarter but now, she is not so sure.

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