The Consumer Price Index (CPI) peaked at a 13-year high of 7.8% in July, a reflection of global trends as food and fuel prices soared, not least because of Russia’s invasion of Ukraine. By fits and starts, domestic inflation has since been cooling, easing in November to 7.4% on an annual basis, from 7.6% in October.  

The best that can be said about this is that CPI is moving in the right direction, but the devil is in the details. Food inflation in the year to November accelerated to 12.8% from 12.3% from the previous month, a trend that will continue to extract a toll on poor and working-class households who are bearing the brunt of the “cost-of-living crisis”. Fuel inflation slowed, but remains elevated at 22.1%.   

Meanwhile, core inflation, which excludes food, fuel and energy prices, remained unchanged on an annual basis in November at 5.0%, and this is an indicator over which the South African Reserve Bank has raised red flags.  

The South African Reserve Bank, since November of last year, has jacked up rates by 350 basis points from record lows, taking the prime lending rate to 10.5%. Rates are expected to continue to rise in 2023, but the pace and scale of the hikes should slow if inflation maintains its downward trajectory. 

Inflation is also slowing in the US and rate hikes there should reflect that next year. The South African Reserve Bank often has to be mindful of the US Fed’s moves because if the difference in rates narrows too sharply, the rand exchange rate can suffer against the dollar. 

But don’t expect the central bank to let up on its current tightening cycle until CPI is comfortably below the top of its 3% to 6% target range.  

“It is important that the central bank continues to deploy its instruments to tame the monster of inflation,” Governor Lesetja Kganyago said last month.  

South African consumers are clearly hard-pressed — more than 40% are jobless, according to the widest definition of unemployment — a point made clear by retail trade sales data. The latest figures on that front, also published by Stats SA on Wednesday, showed that retail trade sales fell by 0.6% in the year to October. On a monthly basis, they eked out growth of 0.4%, but in the three months to the end of October, there was a 1.4% contraction compared with the preceding three-month period.  

This suggests that the economy, which remains under the spell cast by the curse of rolling blackouts, got off to a faltering start in the fourth quarter (Q4) of this year after expanding by an unexpectedly brisk 1.6% in Q3. Mining production tanked by 10.4% in the year to October, while manufacturing output rose by a paltry 1%. Inflation is gradually decelerating, but so it seems is economic growth, and probably at a faster pace. DM/BM