South Africa’s consumer inflation is at a 16 year low – but these things have become more expensive in the last year

Statistics South Africa has published its Consumer Price Index (CPI) for December 2020, capping off a year which saw an average annual inflation rate of just 3.3%.

This is the lowest annual average rate since 2004 (1.4%) and the second-lowest since 1969 (3%).

Annual inflation ended 2020 at 3.1% in December, slightly lower than November’s reading of 3.2%. The monthly increase in the CPI was 0.2%, up from 0% in November.

The food and non-alcoholic beverages category was the main driver of inflation in December, with a monthly increase of 0.5% and an annual rise of 6%. This was up from November’s annual reading of 5.8%.

Luigi Marinus, portfolio manager at PPS Investments, said that the impact of the Covid-19 pandemic and the most recent lockdown due to a second wave of infections remains the most important consideration in policy decision making.

“Even though there has been much spoken and written about the efficacy and rolling out of vaccines, it is still uncertain when a large enough proportion of the South African population will receive this vaccine.”

This, Marinus said, makes planning, especially for those business directly affected by lockdowns, very uncertain.

“The most recent growth forecasts for South Africa have been underwhelming when compared to global expectations and in this backdrop, together with what appears to be sustained low inflation, it is hard to see why the Monetary Policy Committee will not further reduce short term interest rates.”

Despite the low inflation, StatsSA’s data shows that some everyday items are still much more expensive compared to December 2019 data.

In particular, three food groups recorded above average annual and monthly price increases in December:

• Meat prices rose by 7.3% from a year ago and by 1.2% from November. Stewing beef was 2.9% more expensive than it was in November 2020 and 12.4% more expensive than in December 2019.

• Prices in the oils and fats category climbed by 10.2% over 12 months and by 1.6% over one month. Cooking oil prices increased by 11.3% since December 2019 and by 2.9% between November 2020 and December 2020.

• Inflation in sugar, sweets and dessert products recorded an annual rise of 8.4% and a monthly rise of 1.1%. White sugar prices increased by 1.1% over the month, and by 10% over the year.

Petrol price increase

South African motorists will also need to brace for a steep petrol price in February which could have a knock-on impact on food and other grocery prices due to increased transport costs.

Commenting on unaudited mid-month fuel price data released by the Central Energy Fund, the Automobile Association (AA) said that unless the picture drastically improves by month-end, South Africa’s fragile economy is set for a major hit.

The group forecast that petrol is set for an increase of 80 cents a litre, diesel is flagged for an increase of around 61 cents a litre, and illuminating paraffin for an increase of 63 cents.

“The problem is international oil prices, which have been consistently climbing with each passing day,” the AA said.

“A general increase in positive sentiment as Covid-19 vaccines are rolled out has combined with upticks in global economic activity, pushing up demand for oil – and taking prices with it.”

The association said an increase of this magnitude would make life harder still for transport companies and the many people whose livelihoods have been crushed by the economic carnage of Covid-19.

Read: Here’s how much money top directors earn in South Africa