Inflation pulls back more than expected

 ·24 Jan 2024

Annual consumer price inflation pulled back in December a little bit further than expected, easing to 5.1% from 5.5% in November and 5.9% in October.

The inflation figure was slightly lower than market expectations of 5.2%

The consumer price index (CPI) was unchanged month-on-month in December.

According to Stats Sa, the December release completes the picture for inflation in 2023 with the average CPI levels at 6.0% for the year, in line with expectations.

Inflation for the year was lower than 2022’s 6.9% figure, and on the outer limit of the South African Reserve Bank’s target range of 3% to 6%.

Despite the easing of inflation in December, economists expect CPI to tick higher in the first few months of 2024, anticipating a rise to 5.8% y/y in January. However, annual inflation is still expected to come down to the mid-point of the SARB range at 4.5% for the year.

“Inflation was relatively hot in the first five months of 2023 (January–May), with the headline rate consistently above 6.0%. Inflation eased below this level for the remaining seven months of the year. The highest reading in 2023 was 7.1% in March. The lowest was 4.7%, recorded in July,” the stats body said.

Product categories ending the year with annual rates higher than 6.0% in December were food & non-alcoholic beverages (8.5%), restaurants & hotels (7.0%) and health (6.5%).

The 8.5% inflation rate for food & non-alcoholic beverages (NAB) was lower than November’s 9.0%. Inflation softened for five food & NAB sub-categories: bread & cereals; oils & fats; sugar, sweets & desserts; vegetables; and hot beverages.

The bread & cereals price index declined by 0.2% between November and December, lowering the annual rate for this category to 7.5%. Maize meal prices eased by 0.9% over the same period, with the average price of a bag of maize meal declining from R37.04 in November to R36.64 in December.

Inflation for oils & fats remained in deflationary territory, recording an annual change of -5.9% in December.

Cooking oil prices dropped by 1.6% between November and December. The average price for a 750 ml bottle of sunflower oil was R35.82 in December, lower than the February 2023 peak of R37.47 and well below the high of R45.33 recorded in July 2022.

Although the sugar, sweets & desserts category as a whole recorded a softer annual rate in December, sugar prices continued to escalate. White sugar is 20.1% and brown sugar 24.6% more expensive than a year ago.

Chicken and egg situation

Food and NAB sub-categories that registered a rise in inflation in December include meat; milk, eggs & cheese; fish; fruit; and the miscellaneous sub-category referred to as ‘other’ food.

Annual meat inflation ticked up to 3.9% in December from 3.5% in November. Sharp annual price increases continue to haunt poultry products, such as chicken giblets (up 18.5%), fresh chicken portions (up 14.6%), non-IQF frozen portions (up 8.8%), whole chickens (up 8.4%) and IQF chicken portions (up 6,4%).

The milk, eggs & cheese price index increased by 14.5% in the 12 months to December, higher than November’s rate of 13.9%.

The 12-month increase in egg prices was 38.0%, slightly lower than November’s print of 39.9%. These increases reflect the price hikes seen in the poultry and egg sector due to the impact of the Avian Flu that hit producers in 2023.

Other notable price changes in December include housing & utilities inflation reaching 5.7%, the highest annual increase since May 2017, when the rate was also 5.7%.

Actual and imputed rentals both recorded a quarterly increase of 0.8%, taking the annual rate for actual rentals to 3.1% and for imputed rentals to 3.0%.

The transport index increased by 2.6% in the 12 months to December 2023 – much lower than the annual rate of 13.9% recorded in December 2022. The slowdown is mainly a result of lower fuel prices that decreased by 2.5% over the previous 12 months, and by 2.7% between November and December.

Inflation for restaurants & hotels was 7.0%, up from 6.3% in November. Hotel prices increased by 8.9% in the 12 months to December, higher than the annual rate of 5.6% in November.

The graphs below show the products that recorded the most significant annual and monthly price increases in December.

Read: Big shift in interest rate expectations for South Africa in 2024

Show comments
Subscribe to our daily newsletter