COST OF LIVING
SA consumer inflation slows to 5.1% in December, averaging 6% in 2023
South African consumer inflation slowed in December and averaged 6.0% in 2023, compared with 6.9% the previous year. This will do little to sway Thursday’s interest rate decision by the South African Reserve Bank, but it is a vindication of the central bank’s policy stance.
South Africa’s Consumer Price Index (CPI) slowed in December to 5.1% year on year from 5.5% in November, Statistics South Africa (Stats SA) said on Wednesday.
This was slightly below market expectations, according to Bloomberg’s consensus of 5.2%, and falling fuel prices played a key role.
“The fuel price had a moderating effect, with the petrol price dropping 65c/litre in December,” Investec’s chief economist, Annabel Bishop, said in a note on the data.
Pointedly, food inflation moderated to 8.5% from 9.0%, which will bring some relief to hard-pressed consumers.
“We expect this moderation path to continue in 2024 for most of the products within the food basket,” said Wandile Sihlobo, chief economist at the Agricultural Business Chamber.
“Notably, while we are in an El Niño period, the weather conditions have been quite favourable across South Africa. The agricultural conditions are excellent, and we believe that farmers planted the intended area of 4.5 million hectares for the 2023/24 season, up 2% year on year.”
Still, food inflation remains high and is eating into household incomes across the board, a trend reflected in subdued trading updates from retailers that rely heavily on food sales, such as Woolworths. Hopefully, it will continue to slow this year.
Overall, CPI averaged 6.0% in 2023 compared with 6.9% in 2022.
The December CPI read will have little bearing on Thursday’s interest rate announcement by the SA Reserve Bank’s Monetary Policy Committee (MPC). It is expected to hold its key repo rate steady at 8.25% and the prime lending rate at 11.75%.
Read more in Daily Maverick: SA Reserve Bank likely to hold rates steady as prospects of a cut fade in tandem with US
The SA Reserve Bank’s target range for inflation is 3% to 6% and it would prefer for CPI to reach the middle of that band and stay there for a while. Its focus is on the trajectory of its inflation forecasts and one monthly data set won’t swing the MPC one way or the other.
But the trend will be seen as a vindication of the SA Reserve Bank’s policy stance to date. The central bank is relentless in its mission to tame inflation, and the seeds it planted when it began hiking late in 2021 are now bearing fruit. DM
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