SA annual inflation slows in November, retail trade sales dip in October

South African consumer inflation slowed in November, bringing a measure of relief to consumers who are not exactly flocking to the shops. 

This point was underscored by a 2.5% year-on-year fall in retail trade sales in October, which deepens the prospects that the economy has fallen into a recession after contracting 0.2% in Q3. 



But first, let’s tuck into the (relatively) good news. 

CPI on an annual basis cooled to 5.5% in November – a touch above expectations – from 5.9% in October. It remains in the upper band of the South African Reserve Bank’s 3% to 6% target range. 

“The decline was mainly driven by a monthly decrease of 5.5% in the fuel price index, which drove the annual rate for fuel lower to 1.8% in November from 11.2% in October,” Statistics South Africa said in a statement on Wednesday. 

“With further fuel price cuts in December, we should see a further deceleration in December’s headline print, with a move back towards the 4.5% midpoint of the target for headline inflation in 2024,” said Razia Khan, Chief Africa Economist at Standard Chartered Bank in London.

Oil prices have maintained their downward trajectory, falling 3% on Tuesday to six-month lows below $75 a barrel on oversupply concerns. That should herald more relief at the pumps in the New Year if the rand, which has weakened to back over 19/dlr, does not collapse in a heap.  



Read more: Oil prices up 1% on bigger-than-expected US storage withdrawal | Reuters 

The CPI read will vindicate the SA Reserve Bank’s decision to hold interest rates steady at the last three meetings of its Monetary Policy Committee and it looks set to maintain that policy stance for a while, keeping rates at their elevated levels.  

But food inflation remains a concern – South Africa is suffering a cost-of-living crisis. It quickened to 9.0% from 8.8% in October. 

Egg prices accelerated sharply again, rising 10.6% on a monthly basis, pushing their yearly increase to almost 40% because of supply shortages stemming from the avian flu outbreaks. But eggs only account for 0.4% of the food inflation basket, so have minimal impact on the overall read. 

Hard-pressed South African consumers are unlikely to rise to the bait of inflation’s overall slowdown. Consumer confidence is at an over two-decade low for the festive season and the 2.5% annual decline in retail trade sales bodes well for November and December. 

It also highlights the point that an economy with an unemployment rate of over 30% has few demand pressures to drive inflation. 

A barely growing or contracting economy also typically lacks demand pressures. 

On a monthly basis, retail trade sales fell 1.2% compared with September. For the three months to the end of October, growth was a paltry 0.3%. 

The mining and manufacturing production data for October surprised on the upside, but in the latter case that was mostly because of base effects. 

Read more in Daily Maverick: Prospects of SA recession lower after mining and manufacturing output surprises on the upside

The retail data is another indication that the economy may have tipped into a recession, and that’s not a promising backdrop for consumption or festive cheer. DM