SA’s consumer price inflation eases, but surge in food and transport costs takes its toll

The Consumer Price Index (CPI) in South Africa declined slightly in September to 7.5% from 7.6% in August.  

But the rate of transport and food inflation accelerated by 17.9% and 11.9%, respectively, year on year, which will hurt already vulnerable members of the public, who spend a large portion of their income on food and transportation. And retail trade sales are flat — mostly driven by general dealers.

The main contributors to the 7.5% consumer price inflation rate were food and non-alcoholic beverages, housing and utilities, transport, and miscellaneous goods and services.

Food and non-alcoholic beverages increased by 11.9% year on year, contributing 2 percentage points to the total CPI annual rate of 7.5%. Housing and utilities were up by 4.2%, contributing 1 percentage point; transport added 2.5 percentage points; while miscellaneous goods and services increased by 4% year on year, contributing 0.6 of a percentage point. 

Consumers have been hard hit by the spike in food prices: bread and cereals are 19.3% more expensive than last year; oils and fats are up by a whopping 29%, processed food is up by 15.1%, while meat has risen by 9.9%, fish by 9.1% and vegetables by 10.6%. 

Non-alcoholic beverages are costing a lot more (8.8%), while those who enjoy alcohol are paying 6.5% more than last year. And smokers are paying 4.9% more year on year.

In September, the annual inflation rate for goods was 10.7%, down from 10.9% the month before.

Not all items in the CPI are surveyed every month; additional surveys are conducted for certain categories, with the figures for gym fees (recreation and culture), health insurance, funeral expenses and policies expected to be released this month.  

Commenting on the data, Luigi Marinus, the portfolio manager at PPS Investments, says transport has been the largest contributor to inflation over the past year, particularly since the Russian invasion of Ukraine in February. 

“Although transport has contributed 2.5% of the 7.5% increase over the year, the month-on-month contribution of transport saw a decline of 0.3%, mainly due to the consecutive declines in the petrol price on the back of the slight moderation of the global oil price. 

“Other large contributors to inflation over the year are food and non-alcoholic beverages (2.0%), and housing and utilities (1.0%). As was the case for the past few months, all 11 inflation groups saw an increase in prices year on year. Food and public transport, which are important inflation considerations for many South African consumers, saw increases of 11.9% and 22.1%, respectively, over the year, in part as a result of the secondary effect of the 34.1% increase in fuel prices.”

He says although inflation has been above the top end of the target band, the market is likely to assume we’ve seen a peak inflation level and the trend will be lower going forward. 

The hawkish stance of the SA Reserve Bank will continue as South African and global inflation remains high and an additional rate increase can be expected before the end of the year.

Finance Minister Enoch Godongwana is expected to deliver his Medium-Term Budget Policy Statement on 26 October.

Investec chief economist Annabel Bishop notes that the CPI figure, which came out below the Bloomberg expectation of 7.6% year on year, was aided by the cuts in fuel prices. October’s CPI reading is expected to drop again, to 7.4% year on year. 



“September saw a R2.04/litre cut in the petrol price, and October a R1.02/litre drop. Diesel prices also fell in September, aiding the moderation in fuel costs, with the inflation rate dropping from 56.2% year on year in July, to 43.2% year on year in August and 34.1% year on year in September, while the transport component overall contributed -0.3% [month on month] to the 0.1% [month on month] lift in the headline CPI.”

However, the petrol price is expected to rise again by about 45c/litre next month due to a rise in international oil prices, and diesel by potentially R1.63/litre, which does not bode well for November’s CPI. High freight costs also bolster inflation, Bishop notes.

“International food prices rose by 1.7% month on month in September, a key contributor to local food costs as SA is a price taker for most agricultural food produced through either import or export parity pricing.” 

Bishop says the rise in core inflation — a calculation of the change in prices of goods and services excluding the food and energy sectors — indicates broadening inflationary pressures, and the SA Reserve Bank is likely to worry that high inflation (above its 4.5% year-on-year midpoint target) can become entrenched. 

High inflation can take time to relax, due to shipping costs and price inflation, and it will take time for SA’s inflation rate to fall back below that of the US, UK and the EU.

Retail trade data

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