Bad to worse for coffee lovers in South Africa
South Africa’s Consumer Price Inflation dropped to 4.6% in July 2024, boosting the chances of interest rate cuts shortly.
However, inflationary pressure is still present in certain sectors, including coffee prices, which have continued their upward climb amid global crops being threatened by hot weather and excessive dryness.
Inflation numbers from Stats SA surprised on Wednesday (21 August) dropping from 5.1% in June to 4.6% in July. Markets were anticipating a print around 4.9%.
The current figure is just 0.1 percentage point above the South African Reserve Bank’s target of 4.5%. The July inflation print is also the lowest in three years since July 2021, when the rate was also 4.6%.
Lower annual rates were recorded for several product groups, especially food & non-alcoholic beverages (NAB), transport, and housing & utilities.
While inflation was down 0.5 percentage points year over year, Stats SA noted that CPI increased by 0.4% month over month in July 2024—higher than the 0.1% rise recorded between May and June, indicating that some inflationary pressure is still present.
Food inflation dips further.
The annual rate for food & NAB was 4.5% in July, down from 4.6% in June.
Food & NAB has been experiencing a slowing inflation trend since its recent high of 9.0% in November 2023. It is at its lowest level since September 2020 (3.8%).
Unfortunately for tea and coffee drinkers, inflation for hot beverages remains elevated.
The price index for the category jumped sharply by 17.6% for the year ended July, up from 16.5% in June.
The largest annual price increases were recorded for instant coffee (up 21.8%), drinking chocolate (17.7%), black tea (15.7%), ground coffee and coffee beans (14.6%) and rooibos tea (11.1%).
Cappuccino sachets saw the lowest price increase in this category, rising by 7.6%.
Coffee prices in particular are under global pressure with dry weather conditions in the biggest producer nations putting crops under threat.
Dry conditions in Brazil and Vietnam are threatening global coffee crops, with analysts warning that excessive dryness in Brazil may cause premature flowering of coffee trees and reduce yields for the country’s 2024/25 coffee crop.
These pressures are being felt locally, reflected in the pricing.
Other food inflation
Bread & cereals are also showing upward momentum. The category saw an annual increase of 5.6% in July, up from June’s 5.2%.
Other products with large annual increases in July include rice (up 21.3%), pizza or pies (up 11.6%), and samp (up 6.9%). On average, maize meal prices jumped by 5.1%.
Looking more positively, prices for bread flour, cake flour, pasta and macaroni are lower than a year ago.
“Meat is the most heavily weighed food group in the inflation basket, accounting for just over a third of household food spending. The price index for meat recorded a monthly decline of 0.4% and an annual rise of 1.0%,” said Stats SA.
Fuel prices decline for a second consecutive month
Apart from public transport, most categories in the transport group saw lower annual rates. This includes new and used vehicles, running costs and fuel.
Annual transport inflation thus softened from 5.5% in June to 4.2% in July.
Fuel prices also dropped for a second straight month, dropping from 4.6% in June to 3.6% in July.
Stats SA also included tariff increases for the July print as most municipalities implement increases.
“Overall, the housing & utilities index increased by 2.6% between June and July, leading to an annual increase of 5.3%. This contributed 1.3 percentage points to the overall inflation rate,” said Stats SA.
“Tariff hikes were lower in 2024. Electricity tariffs increased by 12.1% (compared with 15.3% in 2023), water tariffs by 7,5% (compared with 9.6% in 2023,) and property rates by 10,7% (compared with 8.4% in 2023).
A closer look at the tariffs shows that electricity prices have risen faster over the last 15 years, seeing an average growth rate of 10.5% per year from 2009 to 2024, outpacing water tariffs (average 10.2%) and property rates (6.8%).
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