Inflation shock for South Africa – here are 11 things that are much more expensive

 ·24 Aug 2022

Statistics South Africa has published its latest consumer price index, showing that annual consumer price inflation has broken through the upper limit of the Reserve Bank’s target range for the third consecutive month.

Inflation was recorded at 7.8% in July 2022, up from 7.4% in June 2022. The July rate remains the highest reading since May 2009 (8%), when the economy was facing the headwind of currency depreciation during the global financial crisis.

The main contributors to the higher annual inflation rate were food and non-alcoholic beverages; housing and utilities; transport; and miscellaneous goods and services, Stats SA said.

Food and non-alcoholic beverages increased by 9.7% year on year and contributed 1.7 percentage points to the total CPI annual rate.

Housing and utilities increased by 4.0% year on year and contributed 1.0 percentage point. Transport increased by 25% year on year and contributed 3.4 percentage points.

Miscellaneous goods and services increased by 3.6% year-on-year and contributed 0.5 of a percentage point.

In July the annual inflation rate for goods was 11.5%, up from 11.0% in June; and for services, it was at 4.2%, up from 3.9% in June.

Inflation is being driven higher by food and fuel inflation, which both recorded the highest rates for July. However, the introduction of higher electricity rates from municipalities – which took effect in July – also contributed to the higher number.

Food inflation hit 10.1% in the month, driven by bread and cereals and oils and fats – two major exports that have been hit globally by the ongoing war in Ukraine.

However, the entire food segment has seen prices much higher and now fall outside the Reserve Bank’s inflation target of 3%-6%, including fish, meat, vegetables and confectionery.

Meanwhile, taking into account the significant fuel price hike that took effect in July 2022, fuel inflation hit 56.2%.

The higher fuel price in July also had a knock-on effect on public transport, with higher fuel costs also pushing up ticket prices. The segment recorded inflation at 22%.

The list below shows which basket items are above July’s inflation number and those which fall outside the target band.

  • Fuel: +56.2%
  • Oils and fats: +36.2%
  • Public transport: +22.0%
  • Bread and cereals: +13.7%
  • Processed food: +12.9%
  • Fish: +9.7%
  • Meat: +9.4%
  • Other food: +9.0%
  • Vegetables: +8.3%
  • Electricity: +8.1%
  • Spirits: +7.9%
  • Sugars, sweets and desserts: +7.5%
  • Unprocessed food: +7.5%
  • Hot beverages: +7.0%
  • Appliances: +6.5%
  • Restaurants: +6.5%
  • Other running costs for transport: +6.4%
  • Vehicle purchases: +6.3%

Only two basket items actually dropped, month on month: fruit (-1.4%) and telecommunication equipment (-11.9%).

Good news on the horizon

While the July inflation numbers are a sharp shock for consumers, economists anticipated a higher figure for the month.

However, Nedbank economists this week said that the inflation outlook for August and beyond is more positive as a lower fuel price and stabilisation of cooking oil prices are set to take effect.

After months of steep fuel price hikes on the back of the Russia-Ukraine crisis and global fallout from the Covid-19 pandemic, August saw prices come down by R1.32 a litre.

Positive news for consumers is that the declining petrol price trend is looking to continue through to September, with the latest snapshot from the Central Energy Fund (CEF) showing a R1.70 to R2.40 per litre over recovery for diesel and petrol, respectively.

This reduction in price should prove favourable for the inflation numbers for August and September.

The positive petrol and inflation trends have been echoed by other economists and analysts.

Earlier in August, the Bureau for Economic Research (BER) noted that households could be in for some respite in the coming months as petrol and food prices are set to cool off.

According to the BER, the easing of oil prices – which has continued through the mid-month period and through to today – will have another knock-on effect, suggesting that the country may have seen the peak of the inflationary cycle for both fuel and food, it said.

The Pietermaritzburg Economic Justice & Dignity group (PMBEJD), meanwhile, also noted a tapering off in food prices month-to-month, suggesting an end to accelerating inflation.

Investec chief economist Annabel Bishop said that falling food and energy prices since the end of Q2.22 have contributed to a moderation in commodity prices overall, subduing pressure on the CPI inflation rate.

Read: Why you should expect medical aid price hikes above inflation in South Africa – expert

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