The consumer price index dropped in January to 5.7% from 5.9% in December, Statistics SA (Stats SA) said. It is still near the top of the 3% to 6% target range of the SA Reserve Bank (Sarb), which embarked on a hiking cycle in November last year in a bid to anchor inflation expectations. With oil and food prices still on the boil, some analysts see Sarb’s target possibly being breached, but only briefly.  

“Burgeoning oil prices are expected to continue adding upward pressure on consumer prices, while strong demand for fertiliser will likely continue to fuel chemical prices. Crop losses caused by flood damage across various parts of South Africa in recent months pose a risk to the inflation outlook,” said Jee-A van der Linde of Oxford Economics Africa. 

“Looking ahead, we consider it likely that headline inflation could touch 6% during the coming months, but the impact of base effects should see annual inflation moderate from Q2 onwards.”  

There also seem to be some demand pressures picking up in the economy. 

Retail trade sales rose year on year in December by 3.1%, picking up the pace after 2.7% growth in November and 1.9% in October, Stats SA said. For the last three months of 2021 compared with the previous three months, retail trade sales increased by 5.3%. And for all of 2021 compared with 2020, there was growth of 6.4%. So, most of the ground lost in 2020, when the sector contracted by almost 7%, has been regained.  

(Source: Statistics SA)

“It is a very strong number – it seems people spent. We are starting to see a comeback in retail, perhaps because people have been putting money aside,” Mike Schussler of Economists.co.za told Business Maverick. 

Growth has also been across the board.  

“All seven types of retailers showed positive year-on-year growth rates over this period [2021],” Stats SA said. Textiles, clothing and footwear led the way with perky growth of 19.2%.  

Trading updates from listed retailers have painted a more nuanced picture of the retail scene.  

Value retailers Mr Price and The Foschini Group have posted promising trading updates while Truworths and Woolworths – which target a more affluent market – have disappointed. 

And in an economy with an unemployment rate that is in effect over 46% based on its widest definition, demand pressures are hardly surging. If volatile food, fuel and energy prices are excluded, consumer inflation in South Africa was a muted 3.5% in January. DM/BM