By Lehlohonolo Lehana.
South Africa’s headline consumer inflation fell to 7.6% year on year in August, data showed on Wednesday, suggesting inflation may have peaked in annual terms at 7.8% the previous month.
Consensus among economists polled by Bloomberg was for a rate of 7.5%, while more optimistic analysis from the Bureau for Economic Research pegged the rate at 7.3%.
A more positive angle on the number is that annual inflation has dropped from the figure reported in July 2022, indicating that inflation could start a downward trend, having peaked as some economists projected.
The reality, however, is that the rate remains among the highest readings since May 2009 (8%), and key items in the basket that have the biggest impact on household budgets – food and fuel – are climbing even higher.
The main contributors to the 7.6% annual inflation rate were food and non-alcoholic beverages; housing and utilities; transport; and miscellaneous goods and services.
Food and non-alcoholic beverages increased by 11.3% year on year and contributed 1.9 percentage points to the total CPI annual rate of 7.6%.
Housing and utilities increased by 4% year on year and contributed 1.0 percentage points. Transport increased by 21.2% year on year and contributed 2.9 percentage points. Miscellaneous goods and services increased by 3.7% year-on-year and contributed 0.6 of a percentage point.
In August, the annual inflation rate for goods was 10.9%, down from 11.5% in July; and for services, it was 4.3%, up from 4.2% in July.
Inflation is still being driven by rising food and fuel prices, with food inflation hitting even higher in August at 11.5% (up from 10.1% in July).
Oils and fats and bread and cereals are again the biggest cause of higher food inflation. The former climbed higher to 37.6% (up from 36.2% in July), while the latter jumped to 17.8% (up from 13.7% in July).
However, it’s almost the entire food basket that has seen higher inflation: vegetables, sweets, beverages, and both processed and unprocessed foods are all more expensive.
The only food categories to come down slightly are fish and meat products – but these remain far outside the target band at 9.2%.
A similar case is made for fuel inflation, which has eased to 43.2% (from 56.2% in July) but remains the highest item in the inflation basket.
High fuel inflation has a knock-on effect on things like public transportation costs, which also climbed higher in August to 23.6%.
The slight drop in inflation for August is unlikely to sway the South African Reserve Bank’s Monetary Policy Committee’s rate hike cycle, with most economists expecting a 50 basis point or 75 basis point hike on Thursday.