Expect more tough pricing news for South Africa next week

 ·12 Apr 2024

Stats SA will publish South Africa’s latest consumer inflation figures next week (17 April), with economists expecting another tough month for anyone looking for pricing relief.

Inflation in February came in slightly higher than expectations at 5,.6%, moving in the opposite direction of the target (4.5%) set by the South African Reserve Bank (SARB).

The CPI print has been slowly ticking higher in 2024 and has been above the 5.0% YoY mark since September 2023.

For March, economists expect the rate to once again be above 5.0%, but slightly lower than in February, with Nedbank predicting a 5.5% landing.

“We forecast consumer inflation to edge to 5.5% after surprising at 5.6% in February from 5.3% (in January),” the bank said.

In March, consumer prices are expected to have increased by 0.9%, continuing to be driven mainly by fuel prices.

The petrol price increased again by 5.2% mom in March following a 3.3% rise in February, with the rise reflecting the elevated price of Brent crude oil, which outweighed the effect of the modest appreciation of the rand/dollar exchange rate over the month.

“This pushed the yoy growth in the petrol price to around 6% from 5.5%,” Nedbank said.

The group said that March is a heavier survey month, with items such as actual rentals for housing, owners’ equivalent rent, electricity and other fuels, school and university fees, as well as local bus fares scheduled for the survey.

These will likely contribute to the monthly and annual price increases. However, it added that further moderation in food prices should help counter these increases.

Economists at the Bureau for Economic Research (BER) said that March’s inflation figure should come in lower than February, positing that February is also likely to be the peak rate for 2024 (with the caveat that inflation is unlikely to dip below 5.0% until the second half of the year).

“A hefty petrol price increase (in March) likely supported the m-o-m rate in the overall CPI. However, due to a higher base, headline CPI is expected to have moderated very slightly,” the BER said.

Investec chief economist Annabel Bishop said that South Africa is currently facing inflationary pressure on several fronts, including fuel prices, food prices and taxes – and while the March print is likely to be lower than some projections, the SARB is still likely to view it as unfavourable.

This is key to prospects for interest rate cuts in South Africa this year, with the growing narrative being that they will remain higher for longer – with some even betting that the cutting cycle will not happen in 2024 at all.

“March will also see some pressure from sin tax increases in the budget as the prices of alcohol and tobacco products rose – although there is a slight statistical base effect which will exert some, although not much, downwards pressure,” Bishop said.

“Looking forward, the risks are tilted to the upside for inflation for the year as a whole, from both food and fuel prices for SA. Underlying inflationary pressures have strengthened, all of which support the delay in SA’s interest rate cut cycle.”

Read: Perfect storm hitting interest rates in South Africa

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