South Africa’s consumer price index (CPI) moderated in March and food inflation braked noticeably, which is good news for consumers especially those in lower-income brackets.

But the respite will be short-lived in the wake of the damage inflicted on the staple maize and other crops in the wake of the recent El Niño, which has just ended.

Read more in Daily Maverick: El Niño has ended but the full wrath of its economic and social impact is still to come

To wit, the headline CPI read for March was 5.3% year-on-year, a slowdown from the 5.6% in February, Statistics South Africa (Stats SA) said on Wednesday. Encouragingly, food inflation braked to 4.9% on an annual basis — a 3-1/2 year low — from 6.0% the previous month.

There are still some food items that are a lot more expensive than they were this time last year. The egg shortage caused by Avian Flu outbreaks is largely over, but the price of eggs has still risen 28% over the past 12 months — a reminder of how inflationary pressures from such disruptions can remain in the pipeline for some time.

On that front, it’s worth noting that Stats SA said a slab of chocolate cost 17.9% more in March than it did in March of last year. It will soon be almost a luxury item as a shortage of cocoa beans in West Africa linked to El Niño has seen the price of the commodity surge four-fold in the past 12 months.

Read more in Daily Maverick: Loaded for Bear: Climate change has triggered a coffee and cocoa conundrum

But overall, food inflation has cooled considerably from its recent peak of 14.4% in March 2023 which was largely driven by Russia’s invasion of Ukraine, a major grain producer. This is a big relief especially for low-income households.

That’s the good news.

The bad news is that while food inflation may moderate some more over the next couple of months, it is expected to pick up pace again because of the expected 26% decline in this season’s harvest of the staple white maize compared to last year because of searing heat waves unleashed by El Niño.

“While we foresee food inflation softening towards the middle of the year, there is a likelihood that lower yields following hostile weather conditions will revive price pressures,” Koketso Mano, FNB Senior Economist, said in a note on the data.

The slowdown in inflation overall also hardly means that the ever-cautious South African Reserve Bank (Sarb) is going to begin cutting interest rates anytime soon, especially against the withering prospects of the US Federal Reserve doing so.

At 5.3%, CPI is edging towards the middle of the Sarb’s 3% to 6% target range, but it wants the number and inflation expectations firmly anchored around 4.5%.

“It would follow that nominal interest rates remain at current levels for longer. This is amplified by expectations for Fed rate cuts being pared back, with the market now only expecting two cuts before year-end. Ultimately, the view that interest rates remain higher than pre-pandemic levels for the foreseeable future remains intact,” Koketso Mano, FNB Senior Economist, said in a note on the data.

It is also depressing to note that there are scant demand pressures in the economy. In another data release on Wednesday, Stats SA said retail trade sales fell 0.8% year-on-year in February — a clear indication that consumers remain under pressure. DM