Nedbank economists expect July inflation numbers to hit higher at 7.7% next week – but the bank believes this will likely be the peak, with prices more subdued thereafter.<\/p>\n
“We expect July\u2019s figure to be the peak in the current cycle, with CPI rising by 1.4% mom to 7.7% yoy, after surging to 7.4% in June from a trough of 2% in May 2020,” the bank said.<\/p>\n
Stats SA will publish the latest CPI numbers on Wednesday, 24 August.<\/p>\n
One of the key factors built into Nedbank’s more optimistic inflation outlook for August and beyond is the lower fuel price.<\/p>\n
“July\u2019s hefty petrol price hikes will account for the bulk of the acceleration (in July’s CPI). Petrol prices alone account for 4.82% of the inflation basket. This component of CPI is expected to have increased by 10.4% mom to a frightening 57.7% you,” the bank said.<\/p>\n
However, after months of steep fuel price hikes on the back of the Russia-Ukraine crisis and global fallout from the Covid-19 pandemic, August saw prices come down by R1.32 a litre.<\/p>\n
The full price cut would have been over R2 a litre had the government’s fuel price interventions not ended, adding 75 cents per litre back to the general fuel levy.<\/p>\n
Positive news for consumers is that the declining petrol price trend is looking to continue through to September, with the latest snapshot from the Central Energy Fund (CEF) showing a R2 to R2.50 per litre over recovery for diesel and petrol, respectively.<\/p>\n
This reduction in price should prove favourable for the inflation numbers for August and September.<\/p>\n
The positive petrol and inflation trends have been echoed by other economists and analysts.<\/p>\n
Earlier in August, the Bureau for Economic Research (BER) noted that households could be in for some respite in the coming months as petrol and food prices are set to cool off.<\/p>\n
According to the BER, the easing of oil prices – which has continued through the mid-month period and through to today – will have another knock-on effect, suggesting that the country may have seen the peak of the inflationary cycle for both fuel and food, it said.<\/p>\n
The Pietermaritzburg Economic Justice & Dignity group (PMBEJD), meanwhile, also noted a\u00a0tapering off in food prices month-to-month, suggesting an end to accelerating inflation.<\/p>\n
Investec chief economist Annabel Bishop said that falling food and energy prices since the end of Q2.22 have contributed to a moderation in commodity prices overall, subduing pressure on the CPI inflation rate.<\/p>\n
To date, August and July\u2019s drop in petroleum product prices have overshadowed rand weakness.<\/p>\n
“However, it should be noted that fuel prices are still higher compared to a year ago, which will support inflation to some extent as the headline measure is based on year-on-year changes, and so a collapse in inflation is not likely, just a moderation over H2.22,” Bishop said.<\/p>\n