Cost of living — SA CPI accelerates to 5.3% in January but slowing food inflation brings relief

21 Feb 2024

South Africa’s consumer price index rose to 5.3% in January from 5.1% in December. This lowers the prospect of the South African Reserve Bank cutting rates in the near future. But hard-pressed consumers can take some solace in slowing food inflation.

Statistics South Africa (Stats SA) said the biggest annual price increases in the consumer price index (CPI) basket were restaurants and hotels at 8.0%.

Wining and dining is becoming pricier but this is actually a good sign for the wider economy since it points, among other things, to a rebound in tourism, which Stats SA said last month had reached pre-pandemic levels. There is clearly some demand out there for wining and dining.

The other big annual price climbs were food and non-alcoholic beverages at 7.2%, and health at 6.5%.

Fuel prices are also still fuelling South African inflation. “... a monthly decline of 5.2% in fuel prices between December and January was not enough to subdue the annual rate for fuel, which jumped from -2.5% in December to 3.3% in January,” Stats SA said.

(Stats SA’s Consumer Price Index via Outlier Insights)

The silver lining is food inflation excluding non-alcoholic beverages, which slowed to 7.0% in January from 8.5% in December.

This will be a partial relief to hard-pressed consumers who will likely have to contend with high interest rates for longer. The Reserve Bank is unlikely to begin cutting before the overall CPI number is closer to its 3% to 6% target range, or before the US central bank starts trimming, which is unlikely before June.

Global food prices have been cooling, but there is still fuel in the pipeline that could reignite domestic food inflation.

Optimism about South Africa’s summer crop, including the staple maize, has faded in recent weeks amid reports of crop damage in some of the western regions of the grain belt because of scorching temperatures and a dearth of rain in the face of the El Niño weather pattern.

According to Wandile Sihlobo, chief economist at the Agricultural Business Chamber of South Africa, and other observers, supplies should be adequate but the bumper harvest previously anticipated may not materialise without good rains in the next couple of weeks. This in turn will have implications for food inflation.

But for now at least food inflation is slowing and not taking such a big bite out of constrained household incomes. DM

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