Inflation hits 30-month high

accreditation
0:00
play article
Subscribers can listen to this article

Annual consumer inflation has reached its highest level in 30 months, rising to 5.2% in May from 4.4% in April, Statistics SA reported on Wednesday.

The CPI increased by 0.1% between April and May 2021.

Source: Statistics SA

The main contributors were large increases in food and non-alcoholic beverage prices, which rose by 6.7% year-on-year. Some food prices rocketed, with sunflower oil and tomato prices up by more than 30% between May last year and May 2021.

Transport prices also increased by 15.3% in the past year, reflecting a 37% rise in fuel prices after oil recovered from low points reached during hard lockdown.

Last year’s sharp decline in commodity prices, which contributed to establishing a low base in 2020, had a big effect on May’s inflation rate, says Johann van Tonder, economist at Momentum Investments. "For instance, crude calculations show y/y headline CPI could have been 3.7% in May if the effect of the low base on fuel price increases were removed."

The consumer inflation rate is now dangerously close to breaching the SA Reserve Bank’s upper target level of 6%. Combined with stronger-than-expected economic growth so far this year, this may convince the monetary policy committee to increase interest rates.

"It is possible that some MPC members will start turning hawkish and vote for a 25-basis-point increase in the repo rate in one or more of the next three MPC meetings this year," says Van Tonder.

"However, they are likely to first ascertain whether the current pace of increases in commodity prices will persist, whether strong second-round inflation takes hold and for base effects to work its way out of the system. Within this context, the first increase in the repo rate is expected in the first half of 2022."

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24
Rand - Dollar
14.85
-0.0%
Rand - Pound
20.42
-0.0%
Rand - Euro
17.48
-0.0%
Rand - Aus dollar
10.94
-0.0%
Rand - Yen
0.13
-0.0%
Gold
1,802.28
0.0%
Silver
25.18
0.0%
Palladium
2,675.50
0.0%
Platinum
1,064.50
0.0%
Brent Crude
74.10
+0.4%
Top 40
61,933
+1.0%
All Share
68,064
+1.0%
Resource 10
66,904
+1.5%
Industrial 25
89,442
+0.7%
Financial 15
12,820
+1.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Voting Booth
In light of the recent looting, do you think a basic income grant is the right approach to deal with SA’s hunger and poverty problems?
Please select an option Oops! Something went wrong, please try again later.
Results
It will go a long way in helping fight the symptoms of SA’s entrenched inequality, especially for those who are starving right now
20% - 1270 votes
SA’s problems are complex, and we instead need to spend that money on building and growing our economy, which will help the country in the long run
31% - 2019 votes
All grants are a problem as they foster a reliance on handouts
49% - 3189 votes
Vote