Good news for petrol and food prices in South Africa expected this week

 ·19 Jun 2023

Economists at the Bureau for Economic Research (BER) are expecting May consumer inflation figure to reflect positive news for both food and fuel prices.

In the group’s latest weekly outlook, the BER said that in May, the annual increase in food prices would be muted by the high base of 2022.

“As a result, even though we expect a 0.7% month-on-month rise in food prices, the year-on-year rate should ease towards 12%, from close to 14% in April,” it said.

A similar downward trend is expected for petrol, with the BER projecting the annual rise in the petrol component also to be depressed by last year’s high base.

“In all, headline CPI is projected to increase by 0.2% month-on-month, with the annual rate of increase slowing to 6.4%, from 6.8% in April,” the BER said.

In May, Stats SA reported CPI at 6.8%, down 0.3% from the slight unexpected increase in March.

Nedbank also expects similar figures. In its weekly economic insights report, the major bank said that it expects a marginal decline in consumer inflation to 6.7% year-on-year from 6.8% in April, with prices up by 0.5% month-on-month.

“The acceleration to a much higher level in May last year will likely contain the annual increase in consumer inflation.”

The bank did note, however, that it still expects there to be significant underlying price pressures. These pressures include a shaky and volatile rand, persistent load shedding and poor growth expectations for the overall economy.

Luckily for businesses and consumers alike, winter load shedding has been lower than originally expected, with the warned about stage 8 nowhere to be seen as the country trudges along between outages being suspended and hiked to stage 3 or 4.

Revised food inflation expectations should be music to the ears of consumers who have been having to fork out far above the standard price of goods as food inflation stubbornly lurked at a 14-year high at 14% – it has however indicated downward movement, settling at 13.9% in April.

Petrol prices have stayed flat and are expected to remain that way, barring any significant moves in the rand/dollar exchange rate or global oil prices.

Taking into mid-month predictive data from the Central Energy Fund, one can expect Petrol 95 to decrease by 4 cents per litre while Diesel 0.005% will show no change.

The rand has also shown positive signs. Nedbank said the rand continued its recovery last week, breaking through R18.20/$ for the first time since the third week of April.

“Some of the lift came from the previous week’s positive momentum. The local unit was further supported by indications that power outages this winter are likely to be less severe than initially feared, the US Federal Reserve’s pause, and expectations that President Ramaphosa and other African presidents’ diplomatic efforts would help ease geopolitical tensions,” said Nedbank.

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